A U.S. Government shutdown will immediately slow approval of thousands of mortgages.  If it last for more than a week, it threatens housing and the economic recovery.

The most noticeable changes will come from the IRS and Social Security Administration.  Since the IRS and Social Security Administration are currently shut down, gathering documentation required when applying for a loan will be difficult.  Tax return transcripts and verification of your social security number, both vital parts of the mortgage application process- will not be available during the shutdown.

With FHA loans being government funded loans, the single family FHA loans will only be slowed down in the approval process do to a cut back in workers.  For multifamily FHA loans (condo projects Etc.) on the other hand, will come to a halt until the end of the shutdown.   This is because multifamily FHA loans are funded on a year-by-year basis, whereas single family FHA loans are funded through multiyear appropriations.

Loans that confirm to guidelines set by Fannie Mae and Freddie Mac won’t be affected directly by the shutdown, because government – controlled mortgage fund operations through fees collected from private lenders, not tax payers.  Only 1 out of 4 loans these days are FHA and VA.  This means, the majority of borrowers will not be affected by the government shutdown.

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Thanks for reading,

Steven Cozza