The partial government shutdown has entered its fourth week, leaving many Americans to question the reach of the shutdown’s impact. This piece will specifically address how the shutdown affects real estate transactions.
The short answer: yes, the partial government shutdown will impact real estate transactions throughout the country. Three specific examples include:
- FHA loans. Those who are looking to purchase a home through use of a Federal Housing Act (FHA) loan may experience a slowdown in the approval process. This is because the shutdown has resulted in the furlough of approximately 95 percent of the employees that work within the Department of Housing and Urban Development, the agency that oversees FHA loans.
- Tax documents. In many cases, those looking to buy a home will need to supply tax forms as part of the lending process. This may require contacting the Internal Revenue Service (IRS) for a tax return transcript. The IRS has currently suspended such operations and is unable to provide these forms. As such, these buyers may experience a delay.
- Fannie Mae and Freddie Mac. These, along with other Government Sponsored Enterprises (GSEs), are impacted in an ancillary way. Although normal operations continue, GSEs require federal verification of important information. Information that includes the applicant’s Social Security number and tax filings. As such, the GSEs may allow closings to move forward but will not agree to purchase the loans until they receive official, federal verification.
Buyers are wise to take action to protect their interest during a real estate transaction, particularly during these uncommon times. An attorney experienced in the complexities of a real estate closing can review the documents and reduce the risk of any surprises after the closing is complete.
