Tuesday, October 8, 2013

October 8 Update: Government Shutdown and Loan Closings

Here is the latest information about how the government shutdown is affecting loan closings.

The IRS is not processing requests for tax transcripts, which are normally required to be in the loan file before the loan can be underwritten.  However, lenders are temporarily underwriting loans without having tax transcripts in the file.  Most lenders are allowing loans to close without the transcripts, but a few are still requiring the transcripts to be in the file before issuing the final approval.  Just about all lenders are now requiring that copies of the borrower's actual tax returns (not the tax transcripts) be in the file before they will approve the loan.

All loans are run through various fraud databases (this is not new - it has been going on for years).  If an alert is issued after the fraud check, saying that the Social Security number of the borrower might be fraudulent, then almost all lenders are requiring a Social Security verification before allowing the loan to close.  The problem is that the Social Security Administration is not processing the verifications.  So, for the time being, if a lender needs to verify a borrower's SSN, the loan cannot close.  Almost all lenders are following this policy, although a very few are not.

The only loans that are completely stopped are USDA rural loans.  Conventional loans, FHA loans, VA loans, and CHFA loans are proceeding normally, with the exception of the tax transcript and Social Security number issues.

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