Dennis' Mortgage Blog

Yes.  If there is not an extension passed to continue funding the federal government tomorrow and it shuts down your mortgage process may be impacted.

Many are under the impression that only if their transaction has an FHA or VA mortgage will they be impacted by a government shut down, this is not the case however as most mortgages depend on some aspect of the federal government in processing and/or funding. 

Here is a partial list of what will be impacted that can delay the closing of a mortgage transaction should the federal government shut down:

FHA: FHA case numbers cannot be assigned, delaying the final approval of any new FHA mortgages that do not yet have a case number.  For fundings lenders may choose not to fund FHA mortgages unless they are able to obtain Mortgage Insurance certificates.  Some lenders may go ahead and fund FHA mortgages for a few days and hold them until certificates can be issued once the government gets up and running again, but chances are this would have to be for a very short period of time.

VA: Certificates of eligibility, any forms such as discharge papers, etc that are required from the Department of Veteran's Affairs would be inaccessible until the government is running again.

IRS Form 4506:  Virtually every mortgage taken now requires an IRS Form 4506 to be processed on the borrower.  This form authorizes the IRS to release to the lender a printout showing what was filed on the tax payers personal income tax returns for the years requested.  Lenders use this form to ensure there are no expense deductions, self-employment, rental income, etc that was not claimed on the mortgage application.  If the government shuts down these forms cannot be processed and final loan approvals will be delayed.

IRS refunds:  Some borrowers may be counting on their IRS tax refund as part of their down payment and/or closing costs.  If the government shuts down refunds will not be processed and closing will be delayed unless the borrowers have access to other funds.

Flood Insurance:  If the subject property is in a federal flood zone then no insurance may be issued on the property if the government is shut down.  No insurance, no closing.

These are just some of the major intersections of the federal government and the residential mortgage process.  The primary impact for all mortgage applications and processes is the IRS being unable to process the Form 4506 as this is a standard requirement on all mortgages whether government insured or conventional.

Short-term inconvenience aside, I would rather see a short term shut down of the federal government in order to secure significant long term spending cuts by the federal government than a compromise that has no real impact on the spending in Washington just so we can keep the government operating at a $3.5 trillion loss for another year. 

Mortgage rates continue to remain low for the time being. Call or email Dennis today to determine your purchasing power for a new home loan or monthly savings from a refinance. Direct dial 562-472-1118