Gov't shutdown drives relaxed underwriting standards
Now into its second week, the partial shutdown of the U.S. government while Democrats and Republicans wrangle over a budget is already affecting mortgage markets -- by loosening some underwriting requirements, at least temporarily, in an effort to keep the mortgage market from freezing itself.
[L]enders that sell their mortgages to Fannie and Freddie can now issue loans to homebuyers without waiting for the IRS to reopen, as long as the borrowers make good-faith efforts to show their incomes with copies of tax returns or by signing affidavits.
"We're putting our trust in our customers," said Anita Padilla-Fitzgerald, chief executive of Denver-based MegaStar Financial Corp. "We are going to move forward and continue to fund mortgages for our customers."
In a bulletin issued Monday, Freddie Mac said it is temporarily relaxing the IRS income verification requirement. Incomes will still need to be verified once the government shutdown ends. The agency also said it will continue to purchase mortgages issued to federal government workers or others whose paychecks have been suspended because of the shutdown.
"We're issuing this guidance to help ensure the continued smooth operation of the mortgage market during the temporary shutdown of the federal government," Freddie Mac executive vice president Dave Lowman said in a statement.