Business & Labor
Wed October 2, 2013
Government Shutdown Delays Some Mortgage Loans
The federal government shutdown is delaying and even stopping some lenders from finalizing home loans. With the Internal Revenue Service closed for business, lenders are unable to obtain borrowers tax transcripts, which is a vital step in approving a mortgage. The US Department of Agriculture, which processes rural home loans is closed as well.
Babs De Lay is the principal broker and owner of Urban Utah Homes and Estates. She says lenders, buyers and sellers are panicked.
“You know, it’s the end of the month,” De Lay says. “We have a lot of people closing on their transactions. They have interest rates locked in and if their lenders haven’t pulled their tax returns for buyers than we can’t close on a sellers property, or we can’t close on a buyers loan.”
De Lay says she’s already been through one government shutdown in her career and this is how it ends…
“Their fees are going to go up,” De Lay says. “The time is going to lapse where their loans have locked in. It’s not great for the consumer one way or the other.”
After the economic recession, many lenders started requesting tax transcripts directly from the IRS to validate a borrower’s information.
Most mortgage originators including brokers, smaller banks and credit unions sell mortgage loans to large banks like Chase or Wells Fargo who require tax transcripts from the IRS.
Branden Hansen is the Chief Financial Officer for Bank of Utah.
“We could close the loan, put it on our books, wait until IRS is back open and then validate those tax transcripts, but until those big lenders change their guidelines, it does choke off finance for many Americans,” Hansen says.
Government lenders like Fannie Mae and Freddie Mac do not require the tax transcript. Hansen says Bank of Utah has the ability to sell some mortgage loans directly to those lenders, so many of his borrowers won’t experience delays.