The current government shutdown has far reaching impacts on our economy, including on the housing market. Fortunately the Federal Housing Administration and the Veteran Affairs housing administration is not impacted by the government furloughs. However, all mortgage loans (including FHA and VA loans) could be impacted if the mortgage lender requires IRS certification of the buyer’s tax returns. Normally a mortgage lender will confirm a buyer’s tax returns with the IRS. Unfortunately, this IRS department has gone dark during the current government shutdown. Presently banks are not able to confirm buyer’s tax returns with the IRS. Some banks may offer alternatives to buyers, but if your applying for a mortgage it’s worth asking the lender what if any alternatives they may provide in lieu of confirming tax returns with the IRS (e.g. a sworn affidavit from a CPA). Hopefully this government inaction is only a momentary experience, in which case it shouldn’t have much of any impact on our markets or economy. But if this shutdown lasts beyond a week, we could start to see damaging effects on the housing market.
Fortunately, we do have some good news to report. As of today interests rates for thirty year fixed mortgages in New York slid below 4.0%. Last week the rates were around 4.25%, but today they are hovering around 3.85%. This is a very positive development, but it’s uncertain how the interest rates will react with the other market gyrations and economic uncertainties surrounding the shutdown.
Stay tune to Monticello for news and developments in the Capital Region housing market.
Update: Here is the latest from Doug Seder at Homestead Funding in Latham.
The good news is Fannie Mae, Freddie Mac, the VA and FHA are all open for business. Homestead Funding will not have any problems issuing loan commitments and closing these types of loans.
Unfortunately for Rural Housing loans, the USDA underwriters have been furloughed so all loans currently submitted are “on hold” until these employees are back to work.
This will have several direct effects: Firstly, loans currently submitted for review (in the pipeline) will not be able to close until the USDA issues loan commitment. So until the underwriters are back, these loans will not be released to close. Secondly, once USDA is back, the turn time will be delayed for existing and new submissions. This may impact your expected closing time frame. Thirdly, new USDA loans cannot be approved until USDA is open and the Federal government has once again allocated funds for the program.
Homestead Funding has determined we will close loans without tax transcripts to get us through this period with the least amount of disruption. Not all lenders are as accommodating as Homestead. If this is impacting your business please let me know. In most cases we can close a loan very quickly where other lenders are not able.
