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#Shutdown & Home Mortgage Applications

2018 Washington Government Shutdown Home MortgagesMany home buyers and home sellers may start to wonder how this government shut down impacts home mortgage applications. Whether it’s your mortgage application or the mortgage application of the buyer of your home, it’s worthing talking with your realtor and the borrower’s lender to understand the impacts. This is the latest from the National Association of Realtors. I recall in 2013, the shutdown caused some momentary delays. But the hope is most lending institutions will be able to quickly spring into contingency mode to adopt work arounds for any missing IRS or SSA documents.

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Internal Revenue Service

The IRS is closed and has suspended the processing of all forms, including requests for tax return transcripts (Form 4506T). While FHA and VA do not require these transcripts, they are required by many lenders for many kinds of loans, including FHA and VA, so delays can be expected if the shutdown is protracted. We have received indications that many loan originators are adopting revised policies during the shutdown, such as allowing for processing and closings with income verification to follow, as long as the borrower has signed a Form 4506T requesting IRS tax transcripts. On loans requiring a Form 4506T Fannie Mae and Freddie Mac are expected to adopt relaxed provisions allowing closings but subject to tax transcript verification before the GSE’s purchase the loans.

Social Security Administration

The Social Security Administration is closed and has suspended most customer service functions. According to the SSA Contingency Plan, verifying Social Security numbers through the Consent Based SSN Verification Service will also be suspended during the shutdown, a further complication for mortgage processing. As with IRS income verification, policies vary among lenders, with many choosing to exercise forbearance during the shutdown period subject to subsequent verification. Fannie Mae and Freddie Mac are expected to adopt policies to allow for closing subject to subsequent verification and before GSE purchase of the loan.

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