The United States government experience a shutdown over the weekend. Though it does not mean that there will be no government operation at all, the fact is there will be no operation for non-essential sectors. One of the sectors that will be affected by this is the mortgage industry. Now, what are the effects of government shutdown to the mortgage industry?
Effects of government shutdown to the mortgage industry
The main concern here is delays of loans release simply because government workers will not be in office. To put it clearly, the effects of the government shutdown can be as follows:
- Delay of FHA and VA loan originations.
- Delay in the in verification of social security numbers which leads to a delay in borrower assessments.
- Due to the shutdown, mortgage firms might not be able to verify borrower’s tax returns from the IRS.
“It’s going to take a little longer to get those loans funded. [If the homebuyer] had planned on moving trucks showing up on the last day of the month, it might mean they have to wait maybe another three, four, five days, depending on how long the shutdown takes,” Kelly Decker with First United Bank Mortgage told NBC
Some agencies might try to stay in operation like what Ginnie Mae did over the weekend. It announced that its operation will continue despite the shutdown.
During a lapse in government funding, Ginnie Mae will reduce staffing to essential personnel levels. Importantly, Ginnie Mae will continue to remit timely payment of principal and interest to investors. There will also be no disruption of essential functions like the granting of commitment authority and support for continued issuance of Ginnie Mae-guaranteed Mortgage Backed Securities (MBS) and REMICs.
Mortgage Industry at risk from government shutdown
The effects of government shutdown might have a repercussion on the now booming mortgage industry. Backlogs will be one of the major problems resulting to non-availability of government offices. This means that those selling their properties might wait a little longer and prices might also be higher.
Luckily as of the writing of this article, there seems to be a compromise with Republicans and Democrats. The new law will allow the federal government to operate until February 8. Meanwhile, for the best interest of the mortgage industry, a government shutdown should be averted to avoid its harmful effects.