The 30-year mortgage rate was reported at a three-month low last week at 4.22 percent, and a rate like that would seem to be good news for borrowers. But that drop came just after the U.S. government partially shut down, which complicated things for mortgage lenders and their customers. Lenders may need access to information held by the government in order to process a mortgage application, translating into potentially costly delays for homebuyers.
For instance, the Internal Revenue Service isn't issuing tax transcripts, which lenders may need during the mortgage-application process. The same goes for confirming Social Security numbers. Federal Housing Administration-backed mortgages could face delays, considering a severe reduction in FHA staff, and the Agriculture Department won't process new rural mortgage applications.
In a statement pressing for an end to the government shutdown, Mortgage Bankers Association President and CEO David Stevens (pictured above) noted how the timing affects borrowers. "The furloughs can disrupt time-sensitive mortgage transaction deals by interfering with borrower lock agreements and causing interest rate disparities from the time of closing to the time the loan is securitized," a news release from the association said, quoting Stevens.
This mortgage limbo could jeopardize the sale or purchase a home, as unexpected delays could derail transactions and moving plans. Cash buyers have made up much of home sales in the past few months, and they could beat out a buyer waiting to secure a mortgage.
"The federal government shutdown will have a growing impact on the housing market the longer it continues," Stevens said. "Different loan programs have different requirements, and these disruptions impact lenders in different ways, leading to confusion and fear among borrowers about whether they will be able to close on a home purchase or refinance."