It's day four of the government shutdown, and while lenders are still up and running, they're beginning to experience some delays.
Any glitch in the process, especially in relation to closings, is a problem, said David Stevens, CEO of the Mortgage Bankers Association. Stevens publicly criticized the shutdown Thursday, calling it detrimental to the functionality of the mortgage finance system.
"The furloughs can disrupt time-sensititve mortgage transaction deals by interfering with borrower lock agreements and causing interest rate disparities from the time of closing to the time the loan is securitized," Stevens said. "For these reasons there must be a resolution so that borrowers and lenders are able to return to business as usual."
The glitches surface when lenders discover they are unable to obtain information from the government — or when it's a government-insured loan in the pipeline.
"Lenders processing loans that need tax transcripts, social security number verification or FHA home loans face longer delays and reduced functionality from HUD, IRS and the Social Security Administration,” Stevens explained.
But it may be too soon to sound the warning alarm. Gabe Medrano, a regional sales executive for NexBank's correspondent lending division, says the shutdown is not a problem for his firm right now.
However, Medrano is waiting for the 4506-tax transcript issue to surface since no investor is willing to buy securities without a tax transcript. As long as the government is closed, the process is on hold.
Before a loan closes, the lender orders a tax form to prove a borrower's income. Without it, the loan is not sellable, Medrano explained.
For the most part, the shutdown has impacted federal workers, not the private mortgage finance system. Only time will tell what the ultimate impact will be on lenders.
"However the longer it goes, the greater impact it will have on borrowers, the housing market and the national economy," Stevens with the MBA explained.
Medrano believes this shutdown could take some time, with lawmakers taking a full 17 days to negotiate. However, his firm is not taking any chances. Preparation is key.
"We always look at things as what is the worst case scenario. We want to make sure the lights are always on here, so we are working on the rest of the infrastructure to make sure the mortgage division is prepared,” Medrano told HousingWire.
This way, when the shutdown ends, the mortgage division can pick right back up, Medrano asserted.