The current partial shutdown of the Federal Government has broken a record. The shutdown continues to have an impact on Federal Homeownership Programs. Here is an update from the National Association of Realtors®.
USDA Will Not Guarantee Loans That Do Not Have Conditional Commitments Issued Before The Loan Is Closed
Senior USDA officials advised NAR that the Rural Housing Service will not guarantee loans that do not have a conditional commitment issued before the loan is closed. USDA equated closing loans without a conditional commitment to the FHA Direct Endorsement program and USDA said they have issued no regulations, handbooks or audit procedures permitting that practice.
While some lenders may be considering GUS approval as tantamount to a conditional commitment, USDA reminded us that there are other steps in the USDA loan approval process (e.g. funding availability). They added that there is no precedent in the USDA program for guaranteeing loans that do not have a conditional commitment issued before the loan was closed.
As a reminder, USDA does permit a lender/borrower to close loans that already have a conditional commitment at their own risk. See p. 5 of the Rural Development Contingency Plan.[divider style=”normal” top=”20″ bottom=”20″]
IRS 4506T Processing
As you may have heard, the IRS has reopened the 4506T process. Here is what IRS announced:
“While the IRS remains closed during the partial government shutdown, on January 7, 2019, it will begin processing requests for transcript information made through Income Verification Express Service (IVES) program. Because it will take time to ramp this service up to normal operating status, it may initially take a few days to process these requests, as employees are brought back to work and begin to process requests backlogged since the funding lapse began on December 22, 2018.” [divider style=”normal” top=”20″ bottom=”20″]
Section 184 – Indian Housing Loan Guarantee Program
We have received a question about the availability of Section 184 loans during the shutdown. Unfortunately, in the HUD Contingency Plan for Government Shutdowns, it states the following: (p.80)
“The Office of Loan Guarantee will be closed. Therefore, no case numbers, firm commitments or loan guarantee certificates will be issued for the Section 184 and 184A programs.”
It is important to remember that the Section 184 program is not part of FHA.
HUD Press Release – Impact of Shutdown on FHA Borrowers
HUD issued a press release (at the bottom of this email) reminding servicers to offer special forbearance options to borrowers affected by the shutdown. Brian Montgomery also issued a short note that is included in the press release encouraging lenders “to waive late fees for affected borrowers and to suspend credit reporting on borrowers nationwide who have been affected by the shutdown.” Download the FHA Letter.
Veterans Administration (VA) Circulars on the Shutdown
VA has issued two new circulars concerning the shutdown.
Circular 26-19-1 – Servicing
VA encourages servicers “to extend forbearance to borrowers in distress as a result of Federal Government shutdown”. Download the circular
Circular 26-19-2 – Origination
VA describes measures regarding loan origination as a result of the shutdown. As long as the loan is current and you have been able to obtain all required documentation (pay-stubs, W-2s, VOEs, etc.) prior to guaranty, the loan remains eligible for guaranty. Download the circular
