Government Shutdown Stalls Home Loans
The government shutdown may be as widespread as originally anticipated, but its residual effects are starting to surface. One of the unexpected delays to come from the shutdown is the inability for banks to approve home loans.
Most banks rely on paperwork from the Internal Revenue Service and Social Security Administration to verify a customer’s income or identity. Some also use the assistance of the Federal Housing Administration to process mortgage loans.
But these government organizations are not functioning at 100% during this shutdown. That leaves potential homebuyers without the ability to get the money they need.
The U.S. housing market was finally on an upswing in many areas after the turmoil of 2008. But every day that the government remains on hold, a significant number of home loans go unapproved.
David Stevens, chief executive of the Mortgage Bankers Association and former head of the FHA, told the Washington Post, “The problem is going to grow in magnitude every day this shutdown goes on, because lenders’ liability is at risk.”
Without being able to verify information on loan applications, banks can choose to either take a gamble or temporarily decline an application. Many are going with the latter option.
Reopening the government may not solve the problem. Eric D. Gates, president of Apex Home Loans in Rockville, said, “Even if this were to get resolved in a week, you’ve got an enormous backlog. It’s going to double or triple the effects in terms of delays.”
If you were thinking of applying for a home loan soon, hold off until the government reopens. That will give you a much better chance of approval as banks try to sort through the aftereffects of the shutdown.