The last time we went through a government shutdown in 1995, it was a pain, but not a panic. With Monday’s news that the government is in the midst of a shutdown, it’s important to remember that all mortgages purchased and securitized by Fannie Mae and Freddie Mac will not be affected, since their operations are paid for by the fees charged to lenders and borrowers.
The points below illustrate how government-affiliated mortgage loans and critical steps throughout the loan process may be impacted:
- Federal Housing Administration (FHA) Loans: The Shutdown does not mean a complete stop to FHA loan closings. A report from the Department of Housing and Urban Development has stated that FHA’s Office of Single Family Housing will remain open for business, albeit with a smaller staff. The office will continue to endorse loans and it doesn’t expect the impact on the housing market to be “significant, as long as the shutdown is brief.”
- Department of Veterans Affairs (VA) Loans: The VA will continue to guarantee mortgages for Americans who have served in the military, since these loans are funded by user fees. It warned, however, in its September 25th contingency plan, that Loan Guaranty certificates of eligibility and certificates of reasonable value may be delayed. Litton Mortgage proactively orders these documents immediately in order to keep loans on schedule with timely closings.
- IRS Tax Transcripts: If a loan requires the verification of at least one previous IRS tax return, this process may be delayed since IRS Field offices are not operating during the government shutdown. While prior years’ tax transcripts can be ordered online, there is no indication whether an automated fulfillment system will be impacted. Typically at Litton Mortgage we require Transcripts, but in order to prevent delays, we can work around the need for Tax Transcripts in most cases. Again, our goal at Litton Mortgage is to keep loans flowing and on schedule for our clients and realtor partners. We do this by adapting to our current environment and making modifications in our process.
- Verifications of Employment, for Government Employees: If a federal government employee is seeking a mortgage, and his employment verification is required prior to closing, a lender may be unable to verify this during a shutdown. However, various federal government offices and entities will remain open during the shutdown, including almost all military operations. At Litton Mortgage, we can usually verify a Government Employee’s employment through an online website. If not available and the government office happens to be closed, we will do everything within our power to obtain the documentation needed to keep loans on schedule. There could be delays in rare circumstances, but we will be proactive and work hard to help our clients get the documentation needed.
- Flood Zone Homes: I have personally talked to several insurance agents in town seeking information regarding this. Right now, Flood Insurance is still being issued. The reason for this is that FEMA uses a lot of contractors and public/private partnerships that are still operating. Mapping Issues and Amendments may be impacted, but for MOST homes that require flood insurance, you will not notice any significant delays that would affect timely closings at Litton Mortgage. We proactively will work on flood insurance quickly to help prevent delays.
- USDA Loans: Our commitment to you and the USDA Rural Development program remains Litton Mortgage’s top priority. During this temporary Government Shutdown, Litton Mortgage will continue to close and fund all USDA RD loan transactions for which a conditional commitment has been issued. Unfortunately, if a conditional commitment is not in place, we must wait until one is issued prior to closing the transaction. However, Litton Mortgage can still work on all other aspects to the loan so that the loan is fully approved and only waiting on the conditional commitment. We vow that we will be extremely efficient so that the loan can close within 24-48 hours of the issuance of the conditional commitment. We encourage you to get your USDA RD loans in quickly during this delay as we will continue to operate with the same level of commitment you have entrusted in us over the years.
Our goal at Litton Mortgage is to keep loans flowing and do everything within our power to keep loans on schedule. We will accomplish this by adapting to our current environment, making modifications in our normal process, and operating in peak efficiency. Stay tuned for updates on this very important time. If you have any questions, please call or email me today. I’m here to serve you!
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