As the hours before a midnight deadline ticked away Monday (Sept. 30), the possibility of a federal government shutdown was creating uncertainty in the recovering U.S. home mortgage market.
The extent to which home buyers could feel the pain, real estate professionals said, depends largely on how long the budget impasse on Capitol Hill goes on.
New Orleans area real estate and mortgage professionals said the potential impact will be minimal as long as the hiatus doesn't drag on for weeks, but buyers could see delays in getting their loans processed.
Mike Anderson, president of Essential Mortgage, a company of real estate firm Latter and Blum, said his staff was working furiously Monday to request income and Social Security number verifications from the IRS and Social Security Administration, which will cease issuing the records in the event of a shutdown.
Anderson said loans can't close without the income tax transcripts, a requirement put in place after the mortgage crisis in an effort to fight fraud.
"I think if we go two weeks or longer, I think it's going to have an impact," Anderson said.
The Federal Housing Administration, part of the U.S. Department of Housing and Urban Development, insures home loans for low- and middle-income and first-time home buyers.
HUD said in a contingency plan this week that the agency would continue to endorse new home loans in the event of a hiatus, although with a drastically reduced staff of 68 on-duty employees in the housing office.
Anderson said loan officers can use FHA's computer-automated system to get a case number, the first step in the agency's process. But with a limited staff, FHA won't be available to answer questions as the loan moves forward, he said.
Borrowers seeking loans guaranteed by Fannie Mae and Freddie Mac, which together own or guarantee nearly half of all U.S. mortgages, will see business as usual.
The U.S. Department of Veterans Affairs said it would continue to administer its loan guarantee program.
FHA-backed and VA-backed loans accounted for more than a third of new home loan lending last year, according to the Federal Reserve.
The Department of Agriculture's Rural Development will put on hold on its loan program, Anderson said.
Much depends on where buyers are in the timeline of buying a house and when sales are scheduled to close, said Ross Miller of Miller Home Mortgage in Metairie.
Miller said he hopes sellers "understand that it's not a buyer or mortgage company's fault that this is happening and that they would be accommodating in doing extensions appropriately."
The picture painted by local real estate agents, though, wasn't dire in the short-term.
Claudette Reuther, president of the New Orleans Metropolitan Association of Realtors, agreed. She said she believed lawmakers would reach a last-minute resolution before the industry feels any impact. "It's just one of these things; we just sit back and wait and see what happens," Reuther said.
Terry Roff, a Gardner Realtors managing broker in New Orleans, said he has more long-term concerns that political wrangling in Washington could indicate a protracted freeze.
That would hurt not only borrowers and real estate agents, but also title attorneys, moving companies and others in the industry, he said.
"It has quite a ripple effect," Roff said. "Hopefully, whatever happens will be a non-event or short-lived and we'll get on with business."
The extent to which home buyers could feel the pain, real estate professionals said, depends largely on how long the budget impasse on Capitol Hill goes on.
New Orleans area real estate and mortgage professionals said the potential impact will be minimal as long as the hiatus doesn't drag on for weeks, but buyers could see delays in getting their loans processed.
Mike Anderson, president of Essential Mortgage, a company of real estate firm Latter and Blum, said his staff was working furiously Monday to request income and Social Security number verifications from the IRS and Social Security Administration, which will cease issuing the records in the event of a shutdown.
Anderson said loans can't close without the income tax transcripts, a requirement put in place after the mortgage crisis in an effort to fight fraud.
"I think if we go two weeks or longer, I think it's going to have an impact," Anderson said.
The Federal Housing Administration, part of the U.S. Department of Housing and Urban Development, insures home loans for low- and middle-income and first-time home buyers.
HUD said in a contingency plan this week that the agency would continue to endorse new home loans in the event of a hiatus, although with a drastically reduced staff of 68 on-duty employees in the housing office.
Anderson said loan officers can use FHA's computer-automated system to get a case number, the first step in the agency's process. But with a limited staff, FHA won't be available to answer questions as the loan moves forward, he said.
Borrowers seeking loans guaranteed by Fannie Mae and Freddie Mac, which together own or guarantee nearly half of all U.S. mortgages, will see business as usual.
The U.S. Department of Veterans Affairs said it would continue to administer its loan guarantee program.
FHA-backed and VA-backed loans accounted for more than a third of new home loan lending last year, according to the Federal Reserve.
The Department of Agriculture's Rural Development will put on hold on its loan program, Anderson said.
Much depends on where buyers are in the timeline of buying a house and when sales are scheduled to close, said Ross Miller of Miller Home Mortgage in Metairie.
Miller said he hopes sellers "understand that it's not a buyer or mortgage company's fault that this is happening and that they would be accommodating in doing extensions appropriately."
The picture painted by local real estate agents, though, wasn't dire in the short-term.
Claudette Reuther, president of the New Orleans Metropolitan Association of Realtors, agreed. She said she believed lawmakers would reach a last-minute resolution before the industry feels any impact. "It's just one of these things; we just sit back and wait and see what happens," Reuther said.
Terry Roff, a Gardner Realtors managing broker in New Orleans, said he has more long-term concerns that political wrangling in Washington could indicate a protracted freeze.
That would hurt not only borrowers and real estate agents, but also title attorneys, moving companies and others in the industry, he said.
"It has quite a ripple effect," Roff said. "Hopefully, whatever happens will be a non-event or short-lived and we'll get on with business."
Source: http://www.nola.com/business/index.ssf/2013/09/federal_goverment_shut_down_lo.html
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