How Will the Recent Government Shutdown Impact Your Client's Mortgages?
Now that the government shutdown is finally behind us, many are saying it's business as usual on Capitol Hill, as well as across the nation. But if you look closer, you'll see that the 16-day congressional impasse has had a bit of a ripple effect in many industries. The mortgage industry is no exception to that effect. While there was no fire and brimstone, and the system didn't exactly come crashing down around us, the whole ordeal has left a subtle, yet meaningful, imprint on the industry. That impact is going affect mortgage clients. Here's a look at a few ways you'll notice it. Slower processing and approval times During the shutdown, federal offices were operating with a skeletal staff, but applications for FHA and VA loans were still processed. Many experienced delays due to hurdles with verifying income with the IRS. Additionally, access to tax information was largely unavailable to issuing agencies. The majority of mortgages that had previously been scheduled to close during the 16 days that the government was shut down likely had enough paperwork and verification processed and were handled without a hitch. Especially now that everything is back up and running, there is little cause for concern, though some say the approval process for applications over the next few weeks may be somewhat more sluggish as an influx of applications are submitted and the backlog processed. Any loan applications that were initiated during the two-week long shutdown will likely see a significant delay. This is due to the restricted access to 4506-T forms by IRS personnel while they were furloughed. Varying rates During the shutdown, mortgage interest rates fell to lows nearing historic levels when they dropped to the lowest levels they've been since late 2007. Experts say that those lower rates won't last long as the economy begins to recoup and financial confidence returns for homebuyers. Lower rates make this an ideal time for mortgage clients, as it makes the homebuying process that much more affordable. However, with a housing market that is making a slow yet steady come back from record lows, uncertainty regarding the shutdown could cause buyers to err on the side of caution. In addition to mortgage rates, home insurance is also being affected by the shutdown with fluctuating rates. It has been predicted that mortgage rates will slowly climb back to previous levels, if not higher, within a few weeks. As always, mortgage rates will continue to fluctuate along with the economy. When the U.S. government shut down for more than two weeks, it shook the foundation of our economy, and in turn, mortgage rates dropped significantly as lenders were trying to attract business. As it recovers from the 16-day standoff on Capitol Hill, the mortgage industry will likely see fluctuating rates that will affect clients. It's best to advise consumers to always be acutely aware that the housing market changes all the time, and to always be prepared for the worst. Mortgage rates will continue to rise and fall similarly to the way they always have. Business as usual Thankfully for mortgage applicants, most banks and private investors were still able to continue closing loans during the shutdown. Most developed short-term solutions to manage the issue of not having access to tax records from the IRS in order to do so. But now that everything is back up and running, there's little cause for concern in this regard. Despite slightly longer approval times due to a backlog, few will experience a tangible difference in the mortgage application experience. As experienced, seasoned mortgage professionals that have seen every economic climate there is, this government shutdown is just another hiccup in the volatile environment that is the housing market. Reverse mortgages slowed Aside from some minor rumblings in the mortgage market, little has changed in the area of traditional mortgage lending. Reverse mortgages, on the other hand, are a different story. The U.S. Department of Housing & Urban Development (HUD) requested patience from lenders as it finds its footing and begins to process the backlog of reverse mortgage. HUD did process most requests as usual during the shutdown, but was limited by a cap on the amount of Home Equity Conversion Mortgages (HECMs) it is able to insure. The cap was extended, but there still remains a significant backlog of HECM endorsements which will be handled within the next 30 to 60 days. This may affect client ventures significantly, as requests are processed on a priority-based system by HUD. Generally speaking, the government shutdown is behind us. Despite the drop in home sales in September, followed by a 16-day partial government shutdown that further slowed the market recovery, the industry is slowly returning to business as usual. Morgan Sims is a writer and recent graduate who loves all things tech and social media. She follows trends in the real estate market, and often writes for homeinsurance.com. Follow her on Twitter at @MorganSims00 or e-mail [email protected]