Government Shut Down & Real Estate Business

Government Shut Down & Real Estate Business

It's Day 4 of the government shutdown, many are saying nothing has changed, but what will this mean for real estate and those of us that sell it?  Fortunately, FHA has not shut down, so mortgage processing will not be affected for the Single Family Mortgage Loan Program, but the Multiple-Family Program will be shutdown. FHA, VA & USDA make up 45% of all loans being processed in the country today.  The following comes from the National Real Estate Post, a popular Real Estate info site with Frank Garay & Brian Stevens: 

"FHA said they were going to shutdown with the rest of the Government, then changed their minds and said they were going to stay open insuring FHA loans.  What’s remarkable is that they’re going to stay open with only 4% of their normal staff.  That’s right.  With the Government shutdown upon us, FHA originally said they were going to wait it out along with a bunch of other Government agencies.  Then they came back and said, 'nah, we’ll keep insuring loans, but we’re putting 96% of our staff on furlough.' Really?  So, you’re telling us that you can keep the lights on and insure loans with only 4% or your staff?  Amazing!"

FHA may be "open" but the USDA loan program is frozen until the shutdown is over.  This is especially troubling to those in rural areas or those that seek 100% financing.  The VA and as stated above, FHA will not be affected other than a slow down in response times.  It is wise to inform buyers of the potential slow down as well as sellers so they might think twice before accepting an offer with FHA financing and definitely before considering VA financing as they must realize that any delays may be  completely out of a buyers hands! 

I am optimistic that overall, the shutdown's impact on real estate will be mininimal at best.  Provided this only lasts a week or so.  Since the IRS has shutdown, many loan originators are implementing a more lenient policy in terms of loan processing that requires Form 4056T requesting IRS tax transcripts.  If that form is required as part of your loan process, expect delays, but no one should be penalized for the lag time.  Also with the SSA being shutdown along with the IRS, social security number verification will be delayed as well which can also have an impact on the loan process.

So unless this turns into a 30 day plus shutdown, which is highly unlikely, we won't see too much of a drop or change in the real estate market.  The last shutdown in 1997 was 21 days and everything stayed the same. In all honesty I wish the government would stop self sabotaging & get it together already! We are a much more powerful nation when not so severely divided. Here's to hoping for a quick resolution! Have a great weekend everyone!