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How Will a Government Shutdown Affect the Mortgage Industry?

shutterstock_589919459-300x183All eyes were trained on Capitol Hill, Friday night as the Senate voted on a legislation to keep the government open past midnight as a house bill to fund the government until February 16 faced a block from the Democrats. The bill failed to get the votes on the Senate floor and the government headed into a shutdown.

At the heart of the matter is the demand by Democrats as well as some Republicans to include protections for young immigrants brought to the country illegally as children, in any further funding of the government.

“In the past decade, government involvement in the housing industry has precipitously increased, hastening an even greater dependence on the federal institutions that would be affected by a potential government shutdown," said Five Star Institute President and CEO Ed Delgado. "I call on all congressional stakeholders to stop using the needs of American homeowners as leverage for achieving their policy goals."

If the Senate doesn’t find a resolution today, the shutdown is likely to affect the industry in three major ways:

  • FHA and VA mortgage loan originations could be impacted by the shutdown due to government workers not being in office.
  • Loan applications will be held up if lenders can’t obtain verification of social security numbers
  • Similarly, mortgage firms won’t be able to process loans if the IRS is not available to verify borrowers’ tax returns, effectively creating a backlog when the government eventually re-opens

If the shutdown lasts longer than anticipated, we might see bankers and lenders looking at lowering mortgage rates to attract more business to avoid slowing down the industry.

About Author: Radhika Ojha

Radhika Ojha, Online Editor at the Five Star Institute, is a graduate of the University of Pune, India, where she received her B.A. in Commerce with a concentration in Accounting and Marketing and an M.A. in Mass Communication. Upon completion of her master’s degree, Ojha worked at a national English daily publication in India (The Indian Express) where she was a staff writer in the cultural and arts features section. Ojha also worked as Principal Correspondent at HT Media Ltd and at Honeywell as an executive in corporate communications. She and her husband currently reside in Dallas, Texas. You can contact her at Radhika.Ojha@theMReport.com.
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