With the dubious news that the United States Government has shut itself down, Louisville home sellers and buyers might be wondering exactly how the shutdown affects the housing market. Never fear, I asked local loan professional, Chris Day with Cole Tayler Mortgage, what the government shutdown might mean for those Louisville Home Sellers and Home Buyers who are either in the process of buying a home or thinking about selling their Louisville home, and this is what he said:
As you are probably aware, due to the Federal Government budget expiration, certain government programs have shut down as of October 1, 2013.
There are several agencies that have been impacted by this shut down. The following is a list of impacted areas and how it may affect your transactions, closings, and the housing market.
From Realtor.com -
1. Lower rates may be due to the shutdown - By and large, mortgage rates move with the direction of the economy. If banks and mortgage lenders think the economy is slowing - as it likely will under a prolonged shutdown - they will lower rates to attract more business.
"In fact, rates remain fairly unscathed at this point, although there is an upward bias," says Bob Van Gilder, a mortgage broker at Finance One Mortgage. "There may be some bumps in the road as the IRS and Social Secturity Administration have limited services, which will affect the mortgage process. But if you are being offered a rate that is attractive to you, take it. You can't lose by being able to sleep at night."
2. FHA loans will be impacted - If you are a consumer waiting for an FHA mortgage, you might experience delays. It's likely that even approved mortgages will be slowed while the FHA is on hiatus, even though it may continue to function in other consumer-oriented capacity.
Here's why: There will be fewer FHA workers able to generate the information that allows FHA to assign its case numbers to their loans, and thus, delays are likely.
3. IRS documents - Mortgage companies and banks must verify income of potential borrowers via the IRS. Admittedly, this may only really affect smaller lenders, but the threat is real say some industry pros:
"One of the biggest impacts to the mortgage market is that the ability to obtain a 4506 and and Social Security Number Verification has been halted," says Jason Auerbach, an LPO manager at New York city-based First Choice Bank/Lending. "The 4506 IRS Transcript is verification from the IRS that the income documentation, specifically tax returns, provided by a client match with what they filed." Auerbach adds that the 4506 mandate doesn't affect lenders who sell loans directly to Fannie Mae so many of the big lenders will not experience much disruption. Small lenders, on the other hand, particularly those that sell adjustable rate mortgage to investors may have to halt that lending.
4. A Weakening National Housing Market - HUD, which runs the FHA, has merely 337 out of a possible 8,709 managers and staffers working this week. The longer the labor shortage persists, the more problems loom for our housing market.
"If the shutdown lasts and our commitment authority runs out, we do expect that potential homeowners will be impacted, as well as home sellers and the entire housing market. We could also see a decline in home sales during an extended shutdown period, reversing the trend toward a strengthening market that we've been experiencing," HUD said in a recent report.
HUD reports that essential services, such as HUD homeless assistance grants, housing services for veterans and disabled folks, as well as AIDs patients will continue to function.
The mortgage market will mostly stay afloat in spite of the government shutdown, and homebuyers could even see reduced rates during this period.
Thanks again to Chris Day with Cole Taylor Mortgage for gathering the information above from realtor.com and other outlets.
Chris will be happy to address any further questions regarding mortgages, and I'm happy to help Louisville home buyers and sellers caught in this period of uncertainty. Our contact information is below.
Loan Officer NMLS # 999290
Cole Taylor Mortgage, A Division of Cole Taylor Bank
1949 Goldsmith Ln., Suite 203
Louisville, KY 40218
Phone: 502-479-5626, ext. 109
Image above courtesy of The Libertarian Republic