WHAT THE GOV’T SHUT­DOWN MEANS FOR YOUR MORT­GAGE

Chicago Sun-Times (Sunday) - - BUSINESS - BY HOLDEN LEWIS NerdWallet This ar­ti­cle orig­i­nally ap­peared on the per­sonal finance web­site NerdWallet.

The par­tial fed­eral gov­ern­ment shut­down is com­pli­cat­ing the al­ready com­pli­cated process of get­ting and manag­ing a mort­gage. For one thing, the po­lit­i­cal storm is like se­vere weather at a ma­jor air­port: You can ex­pect mi­nor de­lays or worse. And if you’re among the 800,000 fed­eral em­ploy­ees go­ing with­out a reg­u­lar pay­check, it could mean trou­ble mak­ing a house pay­ment.

Here’s how the shut­down is af­fect­ing home­buy­ers and home­own­ers — and what you can do about it.

If you’re get­ting an FHA, VA or USDA loan

If you’re get­ting a Fed­eral Hous­ing Ad­min­is­tra­tion or Depart­ment of Vet­er­ans Af­fairs loan, it’s likely you can ex­pect de­lays in the un­der­writ­ing process, and it’s pos­si­ble your clos­ing date will be pushed back as well.

There’s good news for most FHA-qual­i­fied home­buy­ers: Sin­gle-fam­ily FHA loans are be­ing funded, even dur­ing the shut­down. FHA home eq­uity con­ver­sion mort­gages (known as re­verse mort­gages) and FHA Ti­tle I loans (fi­nanc­ing for per­ma­nent prop­erty im­prove­ments and ren­o­va­tions) are the ex­cep­tion — and won’t be pro­cessed dur­ing the shut­down. The pro­cess­ing of VA loans will con­tinue, ac­cord­ing to the Mort­gage Bankers As­so­ci­a­tion, but you may have to wait.

Sup­port staff at the VA and at the Depart­ment of Hous­ing and Ur­ban De­vel­op­ment who han­dle un­der­writ­ing or en­ti­tle­ment ques­tions “are un­avail­able, so FHA/VA bor­row­ers may ex­pe­ri­ence de­lays,” says Ted Rood, a se­nior loan of­fi­cer in St. Louis.

Be­cause of the shut­down, VA and FHA spokes­peo­ple weren’t avail­able to pro­vide an es­ti­mate of how many bor­row­ers could have their loans de­layed. But the most re­cent data sug­gest de­lays could po­ten­tially af­fect thou­sands of bor­row­ers.

In Jan­uary 2018, the FHA in­sured mort­gages for 64,401 sin­gle-fam­ily home­buy­ers — of those, 82 per­cent were first-time buy­ers. The VA doesn’t re­port loan guar­an­tees by month, but it guar­an­teed 148,379 loans in the first three months of 2018, or nearly 50,000 a month.

The U.S. Depart­ment of Agri­cul­ture isn’t ap­prov­ing new USDA loans dur­ing the shut­down. Ac­cord­ing to USDA data, the depart­ment guar­an­teed or made about 10,000 sin­gle-fam­ily loans each month in the most re­cent fis­cal year that ended in Septem­ber.

If you’re seek­ing a con­ven­tional loan

Most mort­gages are con­sid­ered con­ven­tional loans, mean­ing they aren’t backed by the fed­eral gov­ern­ment. How­ever, they are fa­cil­i­tated by gov­ern­ment-spon­sored en­ter­prises, such as Fan­nie Mae and Fred­die Mac.

As pri­vate com­pa­nies, Fan­nie and Fred­die aren’t di­rectly af­fected by the shut­down. Mort­gage pro­cess­ing is con­tin­u­ing as usual, ex­cept in cases where the fed­eral gov­ern­ment pro­vides in­for­ma­tion re­quired for un­der­writ­ing.

“The IRS has not been pro­cess­ing 4506-T tax tran­scripts — tax re­turn ver­i­fi­ca­tions — which are re­quired on most files, al­though that ser­vice is restart­ing,” Rood says. “There will still be a back­log due to re­quests that have been pil­ing up since Dec. 22.”

Self-em­ployed bor­row­ers are par­tic­u­larly af­fected by the lack of ac­cess to fed­eral in­come tax tran­scripts. Some lenders may ac­cept signed tax re­turns in lieu of tran­scripts. And the shut­down could also stall ver­i­fi­ca­tion of em­ploy­ment for gov­ern­ment em­ploy­ees.

If you need flood in­sur­ance

Get­ting flood in­sur­ance if you’re buy­ing in a flood-prone area shouldn’t be a prob­lem de­spite some ear­lier trou­bled wa­ters.

The Fed­eral Emer­gency Management Agency an­nounced on Dec. 28 that it would resume sell­ing and re­new­ing flood in­sur­ance poli­cies. That re­versed a Dec. 26 de­ci­sion to sus­pend pol­icy sales and re­newals dur­ing the par­tial shut­down.

If you own a home but aren’t get­ting paid

If the lack of a pay­check has you wor­ried about pay­ing an ex­ist­ing mort­gage on time, con­tact your loan ser­vicer im­me­di­ately. Ex­plain your sit­u­a­tion and ask about al­ter­na­tives.

One com­mon op­tion is for­bear­ance, an arrangement de­signed to help home­own­ers dur­ing pe­ri­ods of fi­nan­cial hard­ship. For­bear­ance tem­po­rar­ily re­duces or sus­pends your mort­gage pay­ments while money is short. For ex­am­ple, Wells Fargo and LoanDe­pot list for­bear­ance on their web­sites, though cases are ap­proved on an in­di­vid­ual ba­sis.

A short-term loan that makes up for missed pay is an­other pos­si­ble op­tion. Navy Fed­eral Credit Union, for ex­am­ple, is of­fer­ing one-time zero per­cent APR loans of up to $6,000 for fed­eral em­ploy­ees and ac­tive-duty mem­bers of the Coast Guard who typ­i­cally use di­rect de­posit for their pay­checks.

Talk­ing with your lender be­fore you miss a pay­ment could keep your credit score from suf­fer­ing a hit.

“We will work with each cus­tomer in­di­vid­u­ally and can help with things such as late fees and not re­port­ing to the credit bu­reau,” Tom Kelly, a JPMor­gan Chase spokesman, said in an email.

If you’re con­sid­er­ing a mort­gage rate lock

Mort­gage rates al­ready had been fall­ing when the shut­down be­gan Dec. 22, and they fell more than an eighth of a per­cent­age point in the two weeks that fol­lowed. That’s why the shut­down could give you a chance to grab a good mort­gage rate.

“Our ex­pec­ta­tion is that this will be a short-term blip and you’ll be glad if you were able to take ad­van­tage of the drop in mort­gage rates,” says Danielle Hale, chief econ­o­mist for Real­tor.com. Her fore­cast as­sumes that the shut­down won’t last for months and that mort­gage rates will rise this year.

‘Lenders are clos­ing thou­sands of loans a day’

Shut­down-re­lated is­sues are caus­ing de­lays of up to two weeks on typ­i­cal loans, ac­cord­ing to Alan Rosen­baum, CEO and founder of Guard­hill Fi­nan­cial in New York City. Still, one in­dus­try leader thinks it’s mostly busi­ness as usual.

“The gov­ern­ment shut­down is hav­ing a min­i­mal im­pact on the mort­gage in­dus­try,” Mat Ish­bia, pres­i­dent and CEO of United Whole­sale Mort­gage, says. “Lenders are clos­ing thou­sands of loans a day. Ev­ery­thing is mov­ing for­ward.”

As well, a Jan. 7 sur­vey of 2,211 mem­bers by the Na­tional As­so­ci­a­tion of Real­tors found that 75 per­cent of re­spon­dents said the shut­down hasn’t had an im­pact on con­tract sign­ings or closings.

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