Government Shutdown could effect buyers and sellers.10/4/2013
Even though some government housing loans are still available during the federal government shutdown, the government paperwork required for some mortgage lenders may hold up those trying to buy a home.
Government offices shuttered and many services dried up Tuesday after the budget standoff in Congress. Because of far-reaching, federal financial and consumer safety checks required in the lending industry, the mortgage business could come to a grinding halt.
If the shutdown continues, some home buyers may not be able to close on their houses.
“It could literally affect every aspect of our business,” said Ben Blanks, vice president of regional sales manager for Three Rivers Mortgage in Columbia.
The company requires a copy of a transcript of an individual’s tax returns from the Internal Revenue Service.
Without that documentation, the loan cannot be approved, which prevents interested buyers from closing on a house.
The affect would ripple through the economy, Blanks said:
- Sellers moving their families would not be able to anymore.
- Buyers would have to figure out where they would stay until the deal closes.
- Real estate agents would have to wait to make money.
- Kids moving in and out of schools would be delayed.
- Moving companies would see bookings fall off.
“And the list goes on from there,” Blanks said.
Chaz Ellis, director of sales and marketing for Two Men and a Truck, said that between 70 percent and 80 percent of the moving company’s business is residential, including first-time home buyers, college students and people moving into assisted living.
But the company is currently booking moves, “so until the phone stops ringing and the emails stop coming in, we’re not really concerned,” Ellis said.
If the shutdown does continue, hopefully the side of the business that does commercial moves will help cover the company’s finances, he said.
Steven Mungo, chief executive officer of Irmo-based Mungo Homes, said the shutdown will not have as much of an effect at the beginning of the month, because about 70 percent of his company’s closings take place at the end of the month.
Government-backed USDA rural home loans are unavailable, and the agency’s website is down but offers links to government services still available, contingency plans and the text of the president’s message to government employees. However, Federal Housing Administration and Veterans Affairs mortgages are still available.
The federal shutdown also has made local accountant Stephen Kirkland’s job more taxing, so to speak.
He has to tell his clients to pay their federal income taxes, even when some of the services those taxes pay for have been suspended.
The shutdown is frustrating for Kirkland as a taxpayer and because of the amount of taxes his clients pay, he said.
“Most people do business with the federal government whether they want to or not,” Kirkland said.
Mungo said a greater impact will be if the federal government defaults on its debt. If there is a short-term spike on interest rates and if mortgage rates go up, then it will be truly bad for business, he said.
“I hope they’re smart enough not to let that happen,” he said.
Reach Cope at 803-771-8657 or on Twitter @cassielcope.