MortgageBrokerNews.ca’s sister site in the United States is tracking the effects of the shutdown on your counterparts south of the border. Is this another reason to be happy to do business in Canada?
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.