The true impact of the government shutdown seems not to be that great at the moment (although try telling that to the people who have been sent home), but is really an unknown entity, and the true effect be only start to be seen after a more lengthy period of time. One of the areas impacted that most people will not realize is mortgage applications. Some might say what have mortgage applications got to do with the government. Well it appears that the key area impacted is to do with the IRS and the issuing of tax transcripts. This is required by the secondary mortgage market for all loan applications, and at the moment the IRS has stated that they will process any forms, thus holding up mortgage applications until the service is available again. Here is a summary of implications for the mortgage market:
1. The IRS has indicated that it will not process any forms, including the issuance of tax transcripts, while the government is shut down. Mortgage Companies are required by the secondary market to supply a verified tax transcript on every loan transaction. If a borrower’s tax transcripts have not already been received, there is the likelihood that this would delay loans in process until this government service is available.
2. In some cases, the mortgage lender will not be able to verify social security numbers which could delay the mortgage process should there be any reason to verify a social security number. This won’t impact most transactions, but there may be a need to verify social security numbers when discrepancies surface in the documentation we collect.
3. There is likely to be limited FHA staff available to respond to questions, emails or other correspondence. However, we do expect that FHA’s automated systems should be functioning and available which will allow us to perform many of the critical mortgage functions like insuring loans, paying mortgage insurance premiums, and issuing FHA case numbers on new FHA loan applications.
Please note that each mortgage application situation is different and you should contact your mortgage broker to find out what if any impact the government shutdown will have on your individual situation.