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Oct 17

The Government Shutdown is Over: Now Can I Close my Mortgage Loan?

At 12:51 AM this morning, President Obama signed a bill extending the Federal Government debt ceiling and allowing the Government Shutdown to end.  So now that things are “back to normal,” what does that mean for mortgage loans?

IRS Tax Transcript Verifications

The biggest hold-up for most borrowers was the IRS tax transcript verifications.  Most lenders allowed loans to fund without these during the 2 week shutdown, but some loans for self-employed borrowers and those with multiple financed properties have been delayed.  Here is the latest update we have received from the IRS this morning:

 THANK YOU for your support and patience during the past 2-3 weeks as well as the next couple of weeks as we work through our inventories.  All employees are required to report to work today within 4 hours of their scheduled start time.  We are currently determining the impact the furlough has caused to our inventories at all five locations.  Requests will still be completed on a first-in first-out basis as most sites are currently completing work from September 27th and 30th.  Our intent is to get back on track ASAP.

 USDA Loans

Once a USDA loan is fully approved by an underwriter, the file is shipped to USDA for their approval.  Since this approval happens at the very end of the transaction, and is required prior to drawing loan documents, USDA loans were stopped in their tracks by the government shutdown.

Prior to the shutdown, the USDA office was about 2 weeks behind on processing loan files.  Now with 2 more weeks of backlog, it will be interesting to see how quickly they can catch up!  The 2 USDA employees I spoke with this morning both said they have applications dated all the way back to September 24th, and their systems are still shut down.  There was also frequent mention of the word “chaos.”

The other issue is that the map referencing the eligible areas for USDA financing was due to be updated on 10/1, eliminating eligibility for many key areas in Yuma county – specifically Somerton and San Luis, AZ.  As of this morning, they have received no direction on what was in the bill, and whether or not the old eligibility map will remain in place.  Stay tuned!

FHA, VA and Conventional Loans

Other than the tax verification issue, and a few delays in being able to verify employment of furloughed workers, FHA, VA and Conventional loans continued to fund during the shutdown without delays.   As long as the IRS does not experience major delays with backlog, these loans should continue to fund on time.

Moving Forward

The best advice moving forward is to be patient!  Although all the problems are not immediately solved, we’re in a much more promising place than we would have been without the passing of the bill last night.  It will take some time to deal with the backlog, but things are moving in the right direction!