Internal Revenue Service (IRS)
The IRS is closed and has suspended the processing of all forms, including requests for tax return transcripts (Form 4506T). While FHA and VA do not require these transcripts, they are required by many lenders for many kinds of loans, including FHA and VA, so delays can be expected if the shutdown is protracted. We have received indications that many loan originators are adopting revised policies during the shutdown, such as allowing for processing and closings with income verification to follow, as long as the borrower has signed a Form 4506T requesting IRS tax transcripts. On loans requiring a Form 4506T Fannie Mae and Freddie Mac have also adopted relaxed provisions allowing closings but subject to tax transcript verification before the GSE’s purchase the loans.
Social Security Administration (SSA)
The Social Security Administration is closed and has suspended most customer service functions. According to the SSA Contingency Plan, verifying Social Security numbers through the Consent Based SSN Verification Service will also be suspended during the shutdown, a further complication for mortgage processing. As with IRS income verification, policies vary among lenders, with many choosing to exercise forbearance during the shutdown period subject to subsequent verification. Fannie Mae and Freddie Mac have also adopted policies to allow for closing subject to subsequent verification and before GSE purchase of the loan.
Department of the Interior –Bureau of Indian Affairs (BIA)
BIA has announced that there will be no processing or recording of property transactions on Leased Indian Tribal Land during the government shutdown.
Federal Housing Administration
HUD’s Contingency Plan states that FHA will endorse new loans in the Single Family Mortgage Loan Program, but it will not make new commitments in the Multi-family Program during the shutdown. FHA will maintain operational activities including paying claims and collecting premiums. Management & Marketing (M&M) Contractors managing the REO portfolio can continue to operate. You can expect some delays with FHA processing, due to short staffing and associated delays with other agency requirements (see IRS and SSA). On October 4, HUD issued a detailed list of Q & A’s, with emphasis on ways in which to verify Social Security numbers.
VA Loan Guaranty Program
Lenders will continue to process and guaranty mortgages through the Loan Guaranty program in the event of a government shutdown.Expect some delays during the shutdown.
The Federal Emergency Management Agency (FEMA) confirmed that the National Flood Insurance Program (NFIP) will not be impacted by a government shutdown, since NFIP is funded by premiums and not tax dollars. Changes to the flood insurance program scheduled to take effect on October 1 will be implemented as scheduled.
Rural Housing Programs
For the U.S.Department of Agriculture programs, essential personnel working during a shutdown do not include field office staff who typically issue conditional commitments, loan note guarantees, and modification approvals. Thus, lenders will not receive approvals during the shutdown. If the lender has already received a conditional commitment from the Rural Development office, then the lender may proceed to close those loans during the shutdown. A conditional commitment, which is good for 90 days, is given to a lender once a USDA Underwriter approves the loan. If a commitment was already issued, the funds were already set aside and the lender may close the loan at its leisure. If Rural Development has not issued a conditional commitment, the lender must wait until funding legislation is enacted before closing a loan.It is important to note that the traditional definition of “rural” for qualifying communities for assistance will be continued in effect during the shutdown. We expect that language to continue the current definition will be included in whatever funding measure is eventually enacted.
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. Both Fannie and Freddie have announced relaxed procedures that will permit closings to go forward without federal verification of Social Security numbers and IRS tax transcripts. However, lenders will have to obtain federal verification of both before the GSE’s will accept loans for purchase. Moreover, the relaxed requirements do not apply to loan modification re-financings. Treasury
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.
National Oceanic and Atmospheric Administration
(NOAA) –U/S/ Geodetic Survey Engineering surveys for flood insurance certificates often require the use of U.S. Geodetic Survey readings. Most web sites at NOAA are not operating during the government shutdown with the exception of sites that are utilized to protect life and property. The U.S. Geodetic Survey site has just come back, for use in the Gulf states only (http://geodesy.noaa.gov/shutdown/) due to the imminent threat of a hurricane.