From: mortgage banker Lou Barnes
The shutdown itself can't be quantified. ...
We are still taking applications, locking rates, processing our little hearts out, and closing. Our principal problem: in the post-Bubble spasm authorities decided that ALL borrowers should produce two years' tax returns (not just the few self-employed, or owners of rental property, or those needing investment income to qualify). And authorities decided that neither the borrowers nor their CPAs could be trusted to give us true copies, so we must pull transcripts from the IRS (the dreaded 4506T).
The IRS is virtually shut down. When it re-opens it will have to process a backlog (of 4506T’s) growing by the hour. Are the authorities helping by waiving the transcript, or granting good faith safe harbor? NooOOOooo. But, Many lenders -- to their great credit -- seem willing to defer the risk to post-closing.
However, home sales and closings will suffer soon, if only by expired rate locks.
And this:
From housing economist Tom Lawler: Fannie Mae on Government Shutdown and Government Verifications:
“In some instances, Fannie Mae requires validation through a government agency, such as the Internal Revenue Service (IRS) and the Social Security Administration (SSA) for certain documentation or information provided by the borrower. During the government shutdown, these requests may not be processed. Fannie Mae is implementing the following temporary policies with regard to these two agencies.
“IRS Transcripts: Fannie Mae requires lenders to have each borrower (regardless of income source) complete and sign a separate IRS Request for Transcript of Tax Return (Form 4506-T) at or before closing. Lenders are only required to execute the Form 4506-T prior to closing for loans originated and underwritten with the policies pertaining to borrowers with five to ten financed properties. This policy requires the lender to obtain the IRS copies of the tax returns or transcripts to validate the accuracy of the tax returns provided by the borrower prior to the loan closing. “Because these requests may not be processed during the shutdown, Fannie Mae is temporarily revising this policy to enable lenders to obtain the transcripts and complete the validation after closing but prior to delivery of the loan. Loans originated and underwritten in accordance with the five to ten financed properties policy with tax returns that cannot be validated prior to delivery are not eligible for sale to Fannie Mae.
“Social Security Number Validation: When data integrity issues pertaining to the borrower’s Social Security number are identified, a lender may be required to validate the Social Security number with the SSA using SSA Form 89. Because these requests may not be processed during the shutdown, Fannie Mae is temporarily revising this policy to enable lenders to obtain the verification prior to the delivery of the loan. If the Social Security number cannot be validated with the SSA prior to delivery, the loan is not eligible for sale to Fannie Mae.”
None of this is positive for a housing market that is moving forward on unsteady ground, but time will tell…
Thanks for reading…Steve Jackson
561.602.1258
