What Effect Would A Government Shutdown Have On Your Transactions?

Today all eyes are on Washington D.C. as Democrats and Republicans duke it out while trying to pass a stopgap continuing resolution, or CR, that would maintain current spending levels and temporarily avert a governmental shutdown.  Not to be confused with the pending conversation about increasing the debt ceiling (again), the current crisis is caused by the Republicans trying to leverage the pending governmental shutdown to push off implementation of the Affordable Care Act (also known as Obamacare).  The Democrats insist that the program be fully funded and that Congress pass what they call a "clean" CR.  No matter how you stand on the issues (this is not a political commentary), here are some of the effects it could have on your home transactions if the shutdown occurs, as well as what effect it is currently having on home mortgage interest rates.

 

Can consumers still get an FHA mortgage?  Yes, the Federal Housing Administration says it "will endorse new loans under current multi-year appropriation authority in order to support the health and stability of the U.S. mortgage market."  However, the reality is that in order to process and facilitate FHA loans, mortgage lenders rely on government employees that will be part of the shutdown, to pull things like CAIVRS reports and to get IRS 4506T forms processed.  So if a shutdown does occur, expect your lender to experience delays that they have no control over.

Can consumers still get a VA mortgage?  Yes, the Department of Veterans Affairs says loans are funded via user fees and should continue.  However, like above, expect issues like those that occurred during the last shutdown, when loan Guaranty certificates of eligibility and certificates of reasonable value were delayed. 

What effect is the looming shutdown having on mortgage interest rates?
We will go into more detail below, but the snapshot is that the current looming shutdown is helping to prop mortgage rates up.  When a compromise is finally reached and the shutdown is averted (or lifted), expect rates to deteriorate.  Volatility is definitely on the horizon.