Vail Daily column: Government shutdown impacts mortgage financing
The United States government is officially shut down. While this may mean that you cannot visit the Grand Canyon, apply for a new passport or see the Washington Monument, the shutdown has greater and perhaps more dire consequences if you have mortgage financing on the horizon.
As you may or may not be aware, the United States government is highly involved in the mortgage industry. Government subsidized or sponsored entities, such as Fannie Mae and Freddie Mac, prop up the mortgage and housing industries by purchasing mortgage debt off of the balance sheets of banks and lenders. Departments within the United States government, such as the Federal Housing Authority or the United States Department of Agriculture or the Department of Veteran Affairs, are directly responsible for mortgage lending. By that I mean government employees underwrite loans that banks send to their departments for their sponsored loan products. These departments of the government directly fund such loans. Furthermore, Internal Revenue Service agents also play a role in most all mortgage transactions whether you know and like it or not.
Many of the details surrounding these departments and their closures are still being determined and sorted through. But as of the writing of this article, it appears as if rural housing financing loans sponsored by the USDA have been suspended until their offices re-open. Closing of the USDA underwriting offices directly impacts Eagle County because as residents we are eligible for USDA financing. For most every mortgage transaction, a borrower’s income must be verified with tax transcripts supplied by the Internal Revenue Service. Most loans cannot close without this verification. With the IRS being short staffed, tax transcripts are not available or able to be obtained by banks and underwriters right now. This could potentially derail closings. But every lender is handling the scenario a little differently. Some lenders are offering alternative options to the actual transcripts from the Internal Revenue Service.
Those are just some of the potential immediate impacts being faced within the industry. Deadlines still loom for lawmakers regardless of the government being shutdown. On Oct. 17, lawmakers must come to some sort of agreement on what to do with the country’s debt limit and our borrowing capacity. Extending the country’s borrowing limits or cutting spending are obviously heated topics of debate right now. Failure from lawmakers to reach some sort of viable and healthy agreement on the debt ceiling limits by this deadline could have severe impacts upon the country’s credit ratings and the government bond pricing. Mortgage rates could certainly go higher in a short amount of time if a viable solution is not passed.
County is vulnerable
Regardless of which side of the aisle you are on, it is for certain that the state of affairs within the county is vulnerable right now. As it pertains to the mortgage industry, many of the immediate consequences of the shutdown are still being worked through and determined right now. Both immediate and future consequences impact mortgage lending and need to be prepared for and closely monitored.
In the current environment, having a seasoned and educated mortgage professional, with many lending sources to access, is vital for those buying and refinancing homes. Navigating through the turmoil, understanding what is occurring and having alternate options is going to be imperative for successfully closing mortgage loans in the near term. How far out that near term goes remains to be seen right now.
William A. DesPortes, of Central Rockies Mortgage Corp., can be reached at 970-845-7000, ext. 103, and email@example.com.