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  • Maria Pugh

HERE iS HOW THE GOVERNMENT SHUT DOWN iS (or isn't) AFFECTiNG LENDiNG


Here's how the government shutdown is (or isn't) affecting lending:

For Conventional, VA and FHA loans - DU/LPA and Total Scorecard (automated underwriting systems or AUS) are still functional.

For USDA (rural) loans - GUS (the automated underwriting system for this loan) is down at this time. This will impact areas in outer reaches of Williamson, Hays, Bastrop, Travis counties and other rural areas. However, in order to fund a USDA loan, the lender must receive a Conditional Commitment (CC) from USDA. They are not issuing CCs during the government shutdown.

The IRS is closed down. This may impact loans that require tax transcripts (self-employed mostly, or other loans where the tax returns were used to verify rental property income/loss). Most lenders can get waivers to be able to close without the tax transcripts (intending to pull them as soon as the government reopens.) However, if you have a buyer who is getting a loan, it might be best to contact the lender to find out if your closing will be delayed.

Flood Insurance - the National Flood Insurance Program (NFIP) is fully funded through May, 2019, however the NFIP has indicated that they're not issuing any new flood policies or renewals for existing policies during the shut-down. Although there are private flood insurance issuers, not all loans or all lenders will allow for private flood insurance. Note that FHA, FHA and USDA loans cannot use private flood insurance, so if you have a buyer who is using one of these government loans, if the flood insurance wasn't already issued, you won't be able to close your transaction until the government reopens and they start reissuing policies.

Social Security - offices are fully funded and open (their budget was approved in October for 2019), however, getting online Social Security Verifications may be delayed just because they can. We get SS Verifications if we're uncertain if a buyer/borrower has provided the correct social security number. It always surprises me how many people transpose numbers when inputting their own application! If the credit report indicates that the SS Verification is required, or the AUS indicates the need for the verification, we may have issues getting them.

Government Employees - if you have a buyer/borrower who is furloughed due to the shutdown, we generally can still proceed with their loan, assuming that we are only using straight income (no overtime or bonus income) to qualify. However, there's no way to get a Verification of Employment (VOE) until the government reopens. Generally, lenders will still allow loans to close, even though the rules indicate that we have to verify employment within 10 days of closing. We would just pull the VOE after the government reopens in order to securitize the loan. However, if this is a prolonged shutdown, and the buyer/borrower hasn't received a pay stub in two months, this may affect their ability to qualify for the loan. The furloughed employees do not receive pay checks during the government shutdown, so their financial picture is impacted. Fortunately, very few government offices are actually closed, due to the fact that many of the budgets were already passed previously, so, the number of impacted employees will be much less than in past shutdowns.

FHA and VA Case Numbers - should not be impacted as these are automatically issued.

VA Appraisal Assignments - many of these are now automated, except for "unusual properties." This should have no impact on the government shutdown.

VA Certificates of Eligibility (COE)- these are automated, unless the system catches an issue on a previous loan or the Veteran is from World War II. We are waiting for clarification from the VA as to whether they'll be researching and issuing COEs during the shutdown.

Condo Approvals - HRAP (for FHA loans) and PERS (for Conventional loans) and VA condo approvals are all on hold right now.

Closings/Fundings - the government shutdown should not affect the closing/funding departments for lenders, other than limitations identified above. The banking system is fully functioning. So is the U.S. Postal System. These are all "business as usual."

Message courtesy of PrimeLending

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