How will the Government Shutdown Affect the Real Estate Market
Written by: Frank Vigliotti, Realtor, ABS, CDPE, PA
October 6, 2013
There are hundreds of agencies and sub agencies within the US Government that are right now affected by the government shutout. South Florida Realtors, Henri Vezie and Frank Vigliotti founders of the Henri Frank Group at REMAX in Wilton Manors, Fort Lauderdale, Plantation and Hillsboro Beach have found some of our clients are being faced with challenges to their real estate transaction that are connected to this historical government action.
As we all know by now, congress has ceased to commend a CR or Continuing Resolution which has cut financial support for the majority of government processes. This shutout went into effect on the 30th of September and has caused many government programs and offices to cease operations as well. So how does this government shutout influence the real estate market? This shutdown has deferred many of the federal mortgage and housing agendas as there has been a suspension of government support.
Internal Revenue Service [IRS]
It is necessary for all agencies to have policies in place in the event of unforeseen events such as these by the OMB or Office of Management and Budget. The IRS has been forced to cease dispensation of all paperwork which comprises all requests for tax return transcripts. Again you may be wondering what this has to do with Realtors and the housing market. These return transcripts are not a necessity when dealing with the Federal Housing Administration or VA but are mandatory when seeking loans with many other agencies. This can lead to many setbacks if the government shutout continues to draw out for much longer.
There have been syndications that many lenders are implementing modified plans throughout the shutout in order to continue business as usual. Lenders are permitting closings and dispensations pending future proof of income providing that borrowers have signed the appropriate forms to apply for IRS tax transcripts. Freddie Mac and Fannie Mae are also following more lenient dealings with loans in which a 4506T form is mandatory. Both are allowing closings providing confirmation of tax transcripts prior to Government Sponsored Enterprises acquiring the loans.
Social Security Administration [SSA]
The Social Security Administration or SSA has been bunged and has closed down the majority of their customer support dealings. This includes Social Security Number confirmation which has a direct effect on preparing mortgages.
Department of the Interior – Bureau of Indian Affairs (BIA)
The BIA or Bureau of Indian Affairs has also stated that no property operations will be process or logged on any Leased Indian Tribal Land as long as the government shutdown is in effect.
VA Loan Guaranty Program
Although there have been some holdups with processing within the Federal Housing Administration, Management & Marketing or M&M Contractors supervising REO portfolios are still in operation. Loan originators under the VA Loan Guaranty program are still able to fulfill and assure mortgages in the midst of the government shutdown but some setbacks should be expected.
Flood Insurance [FEMA]
Some federal initiatives such as FEMA or the Federal Emergency Management Agency have established that their insurance programs will not be influenced by the shutout. This is due to the fact that their programs are financially supported by the premiums they collect, not money acquired from tax income. Consumers can rest assured that all regular operations and future scheduled changes will move forward as planned
Rural Housing Programs
As long as the government lock out continues, staff members from the USDA or U.S. Department of Agriculture who that handle loan note promises, modification validation and dispense provisional pledges aren’t being paid, therefore aren’t working. Although some of the “necessary” staff members from the U.S. Department of Agriculture are still proceeding with business as usual, lenders aren’t able to attain loan approvals as necessary. Borrowers who’ve already had their provisional commitments approved by the Rural Development office will see that their loans will continue to move forward throughout the lockout. Since the loan originator has already acquired a conditional commitment (valid for 90 days), the funds necessary for the loan have already been accounted for therefore the closing process will move forward at the lender’s discretion. On the other hand, if the conditional commitment was not received before the lockout began, (9/30/2013) the loan originator has to stop the transaction until the appropriate funds have been set aside prior to closing.
Federal Housing Administration [FHA]
Although Freddie Mac, Fannie Mae, and their controller, the FHFA [Federal Housing Finance Agency] are proceeding with business dealing as usual since they are dependent on allotted financing. Based on information from the Federal Housing Administration HUD’s Contingency Plan, the FHA will back new borrowers in the Single Family Mortgage Loan Programs but is not taking on new borrowers in the multi-family initiatives. The Federal Housing Administration is still maintaining certain business operations such as maintaining claims and taking premiums throughout the shutout.
Government Sponsored Enterprises
Fannie Mae and Freddie Mac will continue operating normally, as will their regulator, the Federal Housing Finance Agency, since they are not reliant on appropriated funds.
The Making Home Affordable program, including HAMP and HAFA, will not be affected as the program is funded through the Emergency Economic Stabilization Act which is mandatory spending not discretionary spending which will not affect the South Florida real estate market.
For more information on the Real Estate Market in Florida, local in South Florida Broward County, Miami Dade County and Palm Beach County, go to our blog, the Henri Frank Newsroom.
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