Not all lenders say they are worried about the impact of the government shutdown on FHA loans. In fact, several large lenders, including Bank of America, Citibank and Wells Fargo, have said that they will continue to process and close applications for FHA and VA mortgages in the event of a shutdown. JPMorgan Chase will also continue to close FHA loans for which it already has applications, though it is not accepting new applications at this time. Smaller lenders, however, who will suffer more if they cannot obtain an immediate FHA guarantee upon closing, are likely to call a halt to FHA applications all together while Congress struggles to reach an agreement on the budget.
At least in the instance of a relatively short shutdown, the impact of the loss of FHA guarantees appears to loom as a relatively minor issue since several major lenders appear prepared to ignore the shutdown in the short term. However, given that nearly a fifth (19 percent) of mortgages originated last year were FHA loans, the longer lenders are forced to lend without guarantees or are unable to obtain tax records and other documents needed to verify borrower viability, the greater the chance that a shutdown will slow homebuying in a sluggish market as well. Smaller lenders are already “counseling borrowers that potential delays may be caused by a shutdown.”
An analyst from Bank of America Merrill Lynch was not as optimistic as BofA has been on official paper: “We believe it is very likely that loans will not be endorsed and mortgage insurance certificates will not be issued in the event of a shutdown,” one said.
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