Shutdown could derail mortgage deals, industry head warns

by Ryan Smith04 Oct 2013

A mortgage industry head and a leading economist are warning that a prolonged government shutdown could stall the housing recovery.

Mark Zandi, chief economist for Moody’s Analytics, said that if the shutdown isn’t resolved and the debt ceiling raised by Oct. 17 – when the government runs out of money to pay its bills – the consequences could be severe.

“I truly anticipate that lawmakers will get it together, but that is definitely a challenge to my economic outlook,” Zandi told the National Association of Home Builders Thursday. “If policymakers can’t get it together by Oct. 17, we’re toast, and I think we are going into recession.”

The longer the shutdown, the more dire the consequences for the housing market, said Mortgage Bankers Association CEO David H. Stevens.

“The federal government shutdown will have a growing impact on the housing market the longer it continues,” Stevens said in a statement Thursday. “If this shutdown is temporary, the ones affected most will be out of work federal employees. However the longer it goes, the greater impact it will have on borrowers, the housing market and the national economy.

“Lenders processing loans that need tax transcripts, social security number verification, or FHA home loans face longer delays and reduced functionality from HUD, IRS, and the Social Security Administration,” Stevens added. “Different loan programs have different requirements, and these disruptions impact lenders in different ways, leading to confusion and fear among borrowers about whether they will be able to close on a home purchase or refinance.  There are significant impacts on multifamily lenders, as well.  Rental housing properties awaiting FHA financing cannot move forward.”

The shutdown could not only delay mortgage deals, but in some cases derail them, Stevens said.

“The furloughs can disrupt time-sensitive mortgage transaction deals by interfering with borrower lock agreements and causing interest rate disparities from the time of closing to the time the loan is securitized,” he said. “For these reasons there must be a resolution so that borrowers and lenders are able to return to business as usual.”


  • by Bruce | 10/4/2013 8:29:58 AM

    I guess if the shutdown goes on and it effects the housing market they will find a way to blame brokers.

  • by Griff | 10/4/2013 10:47:31 AM

    Bruce as dire as that statement is, it made me smile, only because it is true.

    I have one buyer who was going to write a contract, but she is furloughed without pay, but essential so is working without pay.

    Banks can get around the 4506T requirement but not all broker can. NO USDA mortgages, yep it will be quite a mess just as we were stabalizing.

  • by Bayview Mortgage Inc. | 10/4/2013 2:31:09 PM

    ordering transcripts isn't required if you can document the tax return check or payment to the IRS. You should talk to an underwriter before you post an article. The only mortgages needing actual tax transcripts are portfolio product mortgages. And not many people with a brain are doing anything other than 30 year or 15 year fixed mortgages.


Is TILA-RESPA a good or bad thing long term?