What the shutdown means for the mortgage market

by Ryan Smith03 Oct 2013

Home loans could be held up if the government shutdown that began Tuesday goes on too long, experts say.

Since most loans take between 30 and 60 days to close, a short shutdown – say a week or less – won’t have too much affect, according to a Wednesday USA Today article. But if the shutdown drags on, lenders will likely have to delay some closings.

Although the Federal Housing Administration has said it will keep processing federally insured loans through the shutdown, the agency is currently operating at drastically reduced staffing levels.

“There will be a limited number of exempted FHA staff available to underwrite and approve single family home loans,” Jereon Brown, Deputy Assistant Secretary for Public Affairs, told CNN Monday. “The underwriting and approval process will definitely be slower than normal.”

But the biggest stumbling block to closings during the shutdown is likely to be the IRS, according to USA Today. When lenders process a mortgage application, they pull borrower tax records. The IRS won’t be able to respond to those requests during the shutdown.

“That will be where the holdup occurs,” Don Frommeyer, president of the National Association of Mortgage Brokers, told USA Today.

A longer shutdown could have unintended further consequences as well, USA Today reported. For instance, home sellers may hesitate to accept offers from buyers with FHA loans, fearing closing delays.


  • by Trevor C. Cooley | 10/3/2013 9:08:31 AM

    The biggest problem is USDA Rural Housing mortgages. Their offices are completely shut down and have halted all closings. Even when the goverment decides to figure it out, this will just put USDA behind on their workload. If you've dealt with them in the past, they are not known for their swiftness even when they are able to work.

  • by Roger M. Young | 10/3/2013 9:19:36 AM

    It's not just FHA. I have 4 investors that I sell conventional and government mortgages to that require IRS validations on 100% of files before a file is allowed to close.

  • by Chris in Austin, Texas | 10/3/2013 9:21:43 AM

    NO IRS Employees to verify form 4506T that confirms tax returns
    NO Social Security Employees to verify Social Security numbers
    Mortgage Brokers are OUT OF BUSINESS!!!!


Should CFPB have more supervision over credit agencies?