The Department of Housing and Urban Development assured lenders prior to the government shut down that took effect October 1 that it would maintain its single family operations despite cutting back on staff and services in other areas.
But the shutdown could have an adverse impact on the mortgage market, mortgage industry participants are saying with the National Association of Mortgage Bankers now anticipating a slowdown across the lending system including processing delays relating to required loan documentation such as verifications from the IRS or Social Security offices.
“We were informed that the Federal Housing Administration (FHA) will continue processing of these reports. There is a chance the VA will remain functioning through the government shutdown,” said NAMB President Don Frommeyer. “Those loans that have already closed and are in the process of insuring may have problems. But all in all, most processing of mortgage loans will be unaffected by the shutdown.”
The indirect impact of departments outside of FHA that have closed or restricted capacity could lead to some lenders having to halt operations, NAMB said.
“Without access to tax transcripts and relevant information that must be verified by these agencies, it may not be possible to complete the loan verification process. Thus, the lenders working through the shutdown may come to a standstill while processing loans,” Frommeyer said.
NAMB also pointed to speculation that interest rates may rise in response to the shutdown, which could also have a direct impact on the mortgage market.
In a statement Thursday, Mortgage Bankers Association President and CEO David Stevens called for an end to the shutdown, citing similar delays and a growing impact on the housing market overall.
“The federal government shutdown will have a growing impact on the housing market the longer it continues,” Stevens said. “If this shutdown is temporary, the ones affected most will be out of work federal employees. However the longer it goes, the greater impact it will have on borrowers, the housing market and the national economy.”
While slower processing times for loans requiring tax transcripts and social security verification, or for applications that need to go through HUD, lenders and brokers are delayed, Stevens said, but the impact ultimately falls on the borrower.
“Different loan programs have different requirements, and these disruptions impact lenders in different ways, leading to confusion and fear among borrowers about whether they will be able to close on a home purchase or refinance,” he said. “…The furloughs can disrupt time-sensitive 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.
“For these reasons there must be a resolution so that borrowers and lenders are able to return to business as usual.”
Written by Elizabeth Ecker
