Friday, October 04, 2013

Shutdown: Impact on Mortgage Lending

by Calculated Risk on 10/04/2013 02:38:00 PM

From mortgage banker Lou Barnes:

The shutdown itself can't be quantified. ...

We are still taking applications, locking rates, processing our little hearts out, and closing. Our principal problem: in the post-Bubble spasm authorities decided that ALL borrowers should produce two years' tax returns (not just the few self-employed, or owners of rental property, or those needing investment income to qualify). And authorities decided that neither the borrowers nor their CPAs could be trusted to give us true copies, so we must pull transcripts from the IRS (the dreaded 4506T).

The IRS is shut. When it re-opens it will have to process a backlog growing by the hour. Are the authorities helping by waiving the transcript, or granting good faith safe harbor? NooOOOooo. Many lenders -- to their great credit -- seem willing to defer the risk to post-closing. However, home sales and closings will suffer soon, if only by expired rate locks.
Time to end the shutdown.