Government

Government Shutdown Ends

The Government Shutdown is over.

The IRS is processing 4506-T transcripts on a first come, first serve basis.

The USDA website is back online. They are working on conditional commitments so we should see those USDA loans start to move through the pipeline.

It could be a week or more before the backlog clears out.

10-22 UPDATE USDA does not have appropriated funds. This means they are issuing comments subject to the availability of funds.

Some investors are moving forward with closing fully anticipating funds availability. Others refuse to close without it.

So the USDA is processing commitments but will not issue loan guarantees until funds are available.

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How It Works, Loan Application

Government Shutdown

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Hello all,

I disappeared for a while, and it shows.  It’s October already!  Work took off and I lost sight of my blog. I’m 12 days late on this post but I thought I would share some of the issues we are seeing with the shutdown:

The IRS is working with only 9% staff. This effects the ability for us to pull tax transcripts. 

Since 2009, Fannie Mae ‘highly recommended’ that lenders pull transcripts from the IRS prior to closing a loan.

What’s a transcript? 

After you file your taxes the IRS turns your income information into an electronic record which can be requested with the borrower-signed form, 4506-T.

Why do we pull a transcript? 

When you complete a loan application, you typically give your loan originator a copy of your tax return by which she calculates your income for qualifying.  It would be possible to give them a fake, unfilled tax return with ’embellished’ income.  To prevent such fraud, we pull the IRS record and compare it with the return you provided.

It’s not required to do this, yet we know Fannie Mae will do it if they audit that loan. To avoid any issues, most lenders have adopted the policy of ordering and reviewing tax transcripts.

http://www.ctne.ws/archives/266

Several days into the shutdown our institution made a business decision to close loans without these transcripts as did a number of other investors.  There are some; however, that refuse to purchase a loan without transcripts and that’s their choice.

USDA is closed. 

The U.S. Department of Agriculture insures loans through their Rural Development program. These loans are currently suspended.

Why?

USDA issues a ‘conditional commitment’ once they receive certain pieces of information.  With no one to issue a conditional commitment, loans are unable to close.

Verification of Employment 

We’ve seen several instances were we have been unable to obtain a verification of employment for government workers. In come cases we can get around it.  There have been instances were getting this information was painfully slow and the closing was delayed.

Business as usual:

For the most part, we have been conducting business as usual with very few delays.  For those of you affected, as frustrating as it is, don’t blame your lender or financial institution.  We are as annoyed as you are with the situation. We are doing our best to work around the issues.

Photo credit: Nick Papakyriazis via photopin cc

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Loan Application, Your Mortgage File

FHA, VA, Conventional . . .oh my!

There are many options when it comes to a mortgage. They can be confusing so I’m going to clarify them for you. Let’s start with an important concept. When a bank grants a loan there is a chance they will loose a great deal of money which is known as risk (if you want to know more about this, let me know and I’ll explain the losses incurred by foreclosures).  The majority of us are wary of taking risks. We insure our automobiles, health, life and more to avoid loosing thousands of dollars in case of an event. Banks do the same thing.

We choose large insurance companies like Progressive, American Family, etc — which are private companies– to do the job for us. Or, if your situation allows, there are government insurance programs available. New York 137

Banks insure loans in the same manner. They can employ a private company (MGIC, Radian and Genworth to name a few). Or, they can have the government do it (FHA, VA, and USDA).

Like your insurance company, there are rules that must be followed in order for these companies (or the government) to insure your mortgage. Some are stringent but offer better terms. Others are lenient but the terms more expensive.

The take away? FHA, VA and USDA  are all government programs that insure your mortgage if you can comply with the rules.  Conventional loans are typically privately insured or even uninsured (depending on your loan profile).

What determines which product you take? You should discuss your credit profile in length with your loan officer. He/she knows the benefit of each program and will be able to guide you into the right program. So remember, each type of program has different rules. Contrary to what you might think, it is not your lender just making things up as they go. I promise.

 

And for those interested, I took this tiger picture on my trip to NYC last spring.  Can anyone guess where it’s at?

 

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