Government Shutdown Causing Delays in Home Loan Approvals
While the federal government may not be directly involved with the home loan process, there are several indirect factors that the Federal government has to help with to close a mortgage loan. Large government bodies may all be suffering from furloughed employees and backups in processing approvals. These delays could affect all loan types including FHA Loans, USDA Loans, VA Loans, and even Conventional Loans.
Why will Home Loans be delayed during the Government Shutdown?
Regardless if your bank or mortgage company has stated that delays will not happen, this may not be the case. Delays in third party verifications may cause delays in real estate closings if income, identities or flood zones cannot be verified.
A common verification for any home loan approval is income verification through a 4506-T IRS tax transcript. A standard mortgage process for all mortgage companies and banks, is to obtain an IRS verification of income so that underwriters and quality control teams can verify that the income a mortgage loan applicant has provided is correct and accurate. The IRS has announced that they will be furloughing non-essential personnel including those whom process tax transcripts. If the income cannot be verified through the IRS, the loan will not close on time.
If a borrower cannot fully document their Social Security Number by providing documents such as a Social Security Card, a bank or mortgage company may process a SSA-89 Form for Social Security Number (SSN) Verification. This document is submitted through the Operations Field Officer at the Social Security Administration and processed as a verification of SSN. According to the Social Security Administration’s Shutdown Contingency plan issued on Sept 27th, this will be one of the many activities that will be discontinued.
Another example of possible mortgage delays due to the government shutdown is flood insurance coverage verified through FEMA. FEMA is the government agency that sets the flood zones maps. If lenders cannot verify that homes are not in a flood zone then they may not allow a home loan to close.