Government Shutdown Impact On Homeowners And Buyers

This BLOG On Government Shutdown Impact On Homeowners And Buyers Was PUBLISHED On January 28th, 2019

The partial government shutdown which started on December 22nd, 2018 ended temporarily on January 25th, 2019.

• President Donald J. Trump temporarily ended the government shutdown on Friday, January 25th, 2019
• This is not a full resolution
• Feisty nasty Democrats led by Chuck Schumer and Nancy Pelosi will not even sit down for negotiations in border security funding
• Part of opening up the government was to have border security funding
• Over 800,000 federal workers were impacted by the partial shutdown which lasted 35 days, making the longest shutdown in U.S. History
• Government Shutdown Impact On Homeowners and Buyers began taking a toll
• 25% of federal agencies such as HUD, IRS, USDA, are among the agencies shutdown
• The Government Shutdown Impact On Homeowners and Home Buyers was due to the closure of these agencies

Government Shutdown Impact On Homeowners and Buyers has the biggest impact on USDA Loans.

Government Reopens Temporarily Until February 15th 2019

The 800,000 federal furloughed workers called back to work are not out of the woods yet.

• It may take days or weeks for them to get their back paychecks
• This week is also the week that many Midwestern and Eastern States will get an arctic blast with sub-zero temperatures
• The artic blast may cause major travel delays
• Many workers may not make it to work
• Some federal agencies may also be closed due to the arctic blast
• Government Shutdown Impact On Homeowners and Home Buyers is not over yet
• Unlike previous shutdowns, this partial Government Shutdown Impact On Homeowners and Buyers was worse than expected
• Many homeowners who are living paycheck to paycheck had problems making their mortgage payments on time
• Homebuyers experienced major delays in their home closing
• USDA Home Buyers were at a total standstill because all USDA Mortgage Underwriters were furloughed
• One thing to note is that the partial government reopening is only temporarily

The government can be shut down again on February 15th, 2019.

Government Open For Business

If you are among the 800,000 federal furloughed employees affected, you may have trouble in making mortgage payments.

• A mortgage payment is the largest monthly expense for most households
• Many homeowners had to tap in their savings accounts to make their mortgage payments during the 35 days they were furloughed

However, how safe will they be come February 15th 2019? Will there be another shutdown? Will federal workers be safe if President Trump declares a national emergency for border security funding?

Government Shutdown Impact On Homeowners And Buyers And Government Loans

If the government shuts down again, borrowers with FHA and VA Loans can expect delays.

• No doubt there will be closing delays
• HUD will continue to insure FHA Loans On Single Family Homes
• VA Loans will continue but expect delays
• However, HUD Reverse Mortgages and FHA Title I Loans will be totally shutdown during government shutdown

USDA Loans are halted during government shutdown. This is because all USDA federal underwriters are furloughed.

Government Shutdown Impact On Homeowners On Conventional Loans

Conventional Loans are not government guaranteed loans.

• Conventional Loans are also referred to as conforming loans
• This is because they need to conform to Fannie Mae and/or Freddie Mac Conforming Guidelines
• Fannie Mae and Freddie Mac are government sponsored enterprises
• They are private companies with partial government backing
• Since Fannie and Freddie are not government agencies, they are not affected by the shutdown
• Conventional Loans should not be affected but there will be delays in closing due to delays in IRS 4506T Transcript Verification
• Expect major delays in IRS 4506T verification due to the backlog dating back to December 22nd, 2019
• Especially affected are self employed borrowers due to delays on 4506T Transcript IRS Verification

Government employees can also experience delays in their agencies providing verification of employment.

Government Shutdown Impact On Homeowners Who Are Not Getting Paid

Most American workers live paycheck to paycheck.

• Over 800,000 federal workers were affect and they may get affected again once February 15th rolls around
• If you are a homeowner furloughed federal worker and cannot make the mortgage payment, need to contact loan provider
• Tell them your situation
• Lenders are taking notice of this and have workout departments set up
• Options can be forbearance, workout, loan modification

Some banks and credit unions is beginning to offer short term loans for furloughed federal workers. Homeowners who anticipate being late on their mortgage payments should contact their mortgage servicer as soon as possible. Lenders are willing to work with you if you contact them prior to being late.

How Government Shutdown Affects Lenders

This partial government shutdown caused an average of two weeks of delays in mortgage processing on FHA, VA, and Conventional Loans. USDA Loans were completely shut down due to USDA underwriters being furloughed.  Gustan Cho Associates is nationally known for its no overlays on government and conventional loans. Over 75% of our borrowers are folks who could not qualify for mortgages due to overlays. Despite the government shutdown, Gustan Cho Associates Mortgage Group had record closings for December 2018 and January 2019. Besides USDA Loans, Gustan Cho Associates experienced minor delays during the partial government shutdown. Stay tuned for more news on how government shutdown affects mortgage lending .