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Government Shutdown Has Growing Impact on Lending

Mortgage bankers warn of delays

Oct. 3, 2013

By Mortgage Daily staff

Mortgage bankers are warning of the increasing impact that the shutdown of the federal government will have on real estate finance the longer it lingers.

It is the third day that the federal government has been closed due to a budget impasse between congressional Democrats and Republicans.

Leaders of both Houses who met with President Obama last night indicated after the meeting that no progress was made.

The immediate impact is being felt most by furloughed federal employees who aren't receiving paychecks as lawmakers continue their standoff.

But mortgage lenders are likely to feel the pain the longer the shutdown continues, according to Mortgage Bankers Association Chief Executive Officer David H. Stevens.

"The longer it goes, the greater impact it will have on borrowers, the housing market and the national economy," he stated in an announcement Thursday.

Stevens said that lenders won't be able to obtain tax transcripts and social security number verifications on loans in process as a result of impaired operations at the Internal Revenue Service and the Social Security Administration.

They will also see delays on loans insured by the Federal Housing Administration as the Department of Housing and Urban Development has reduced functionality.

Since different loans have different requirements, Stevens noted that disruptions will vary by lender -- creating confusion among borrowers about whether their loans will close.

Multifamily lenders will also feel the pain as FHA financing is stalled.

"The furloughs can disrupt time-sensitive mortgage transaction deals by interfering with borrower lock agreements and causing interest rate disparities from the time of closing to the time the loan is securitized," Stevens said. "For these reasons there must be a resolution so that borrowers and lenders are able to return to business as usual."

MBA is hosting its annual conference in Washington, D.C., later this month. Stevens didn't immediately respond to a question about how a prolonged shutdown might impact the event.

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