How A Government Shutdown Will Affect Mortgage Participants

posted Sep 30, 2013, 10:53 AM by REMAX PREFERRED   [ updated Sep 30, 2013, 10:54 AM ]
As we face the possibility of a government shutdown, or partial shutdown, may agents and their clients have concerns about how this will affect their loan. A short term shutdown should have limited effects so don’t worry just yet!  There is a distinct possibility that this will be cleared up before much time goes by. So, for now, educate your borrowers and referral partners on what’s occurring. The following describes the potential effects a brief government shut down might have on the mortgage process. The ones highlighted in red could be the most disruptive to production flow:


Information Provided By:

Rich Bersani, Vice President
NMLS: 133243
Front Gate Mortgage

Tower Commons Office Campus
123 Egg Harbor Road, Suite 606
Sewell, NJ 08080
Office: 856.401.9090 ext. 103
Cell: 856.889.8648
E-Fax: 866.325.4759

-          FHA:  

o   FHA will be able to endorse single family loans during the shutdown, however, only a limited number of FHA staff will be available to underwrite and approve new loans so the process may take longer.

o   Limited FHA staff will be available to respond to questions, emails or other correspondence.

o   Lenders will be able to obtain an FHA case number from the FHA Connection.

o   If FHA runs out of commitment authority during a shutdown, then lenders’ Lender Insurance (LI) approval will be temporarily suspended.

o   CAIVRS will be available to determine if a borrower has a delinquent federal debt.

o   FHA Total Scorecard will be available.

o   If a lender submits loans for approval if the lender is in pre-closing, FHA staff will not be available to underwrite and approve loans.

o   FHA will collect the Upfront Mortgage Insurance Premiums (UFMIPs) during a shutdown.

o   Lenders are required to submit monthly MIPs to FHA during a government shutdown.

o   FHA will not perform any post technical endorsement or Quality Assurance Reviews during a government shutdown.

-          GNMA, FNMA, FHLMC:

o   No significant affect

-          VA:

o   The Department of Veterans Affairs (VA) will continue to operate if there is a government shutdown which means lenders will be able to continue originating VA-guaranteed loans. Both lenders and borrowers will be able to obtain their Certificate of Eligibility online, and they will still be able to submit applications and follow up on COEs that require more research with the Atlanta Eligibility Center. Lenders can and should continue to remit funding fees through the Funding Fee Payment System.

-          USDA

o   USDA has not issued guidelines yet, but indications are that they may be similar to those in the 2011 contingency plans issued by OMB. Under this plan Rural Development would cease all but essential functions and no new loans or guarantees will be made.

-          Social Security

o   For verification of borrowers’ social security numbers, lenders rely on either third party vendors or the Social Security Administration (SSA). In previous shutdowns, SSA has only retained employees that deal directly with the processing of new claims and benefits; therefore lenders may not be able to continue to verify social security numbers through SSA

-          IRS (4506-T)

o   The Internal Revenue Service (IRS) has indicated that they will not process any forms, including issue tax return transcripts (Form 4506 T), should a government shutdown occur. Without tax transcripts, loan processing may be delayed, depending on individual housing agency requirements and aggregator guidelines.

-          FEMA

o   FEMA is likely to provide information through a bulletin in the case of a government shutdown. While many functions will be unaffected, because of their use of contractors and public/private partnerships, and it is likely that mapping issues or amendments will be impacted


(This information is based on an expected shutdown of a couple of weeks and does not apply should the situation last longer than that.)