Shutdown unlikely to disrupt housing market

The partial government shutdown is unlikely to disrupt the housing market in the short term, mortgage brokers and real estate agents said Tuesday. But the longer the shutdown lasts, they said, the greater the chance housing-finance and income-verification issues might slow the market's momentum.

From a home buyer's perspective, "there are no immediate impacts to their mortgage as long as they are working with a lender who has delegated underwriting authority," said Mike Copley, head of retail money-out products for TD Bank.

In TD's case, Wilmington-based Copley said, "this means that we're able to make mortgage loan credit decisions on behalf of secondary market investors. . . . We will continue to honor the loans as they've been laid out prior to the shutdown."

Christopher J. Artur, owner of Artur Realty in Mayfair, who deals with many buyers with Federal Housing Adminstration-insured mortgages, said he was confident that loans already in the pipeline would not be affected, since a direct underwriter can approve loans for the agency.

The Department of Veterans Affairs will operate during the shutdown, which means lenders can continue originating VA-guaranteed loans. The Department of Agriculture will cease all but essential functions, however, and no new rural loans or guarantees will be made.

Jerome Scarpello of Leo Mortgage in Ambler said federal guidelines indicate that lenders still will be able to obtain FHA case numbers, and that determinations of whether a borrower has a delinquent federal debt and the "FHA total scorecard" - which measures the credit risk of all FHA loans - will be available.

But Philadelphia mortgage broker and Realtor Fred Glick said he was concerned that a prolonged shutdown prompting the IRS and the Social Security Administration to reduce operations might "bring the mortgage business to a standstill."

"Without the IRS verifying tax returns and the SSA Social Security numbers, no agency will buy the paper because of no quality control of the loan," Glick said.

Information from both agencies confirms such verifications will not be done during the shutdown. IRS transcripts are required for jumbo and bond loans, and no alternatives will be accepted.

As the shutdown proceeded through its first day, there was no apparent panic among buyers and sellers, said Noelle Barbone, office manager at Weichert Realtors in Media.

"There are concerns about a backlog, especially among government guaranteed loans, and that would cause delays in closings," said Robert Brittingham, a vice president at Weichert Title.

Scarpello likened the current situation to the shutdowns that occur when Washington receives more than an inch of snow: "They get behind, and it takes them a while to get to the bottom of the pile."

Still, TD Bank's Copley said, "this should be viewed as a temporary event. The last time a shutdown occurred, it lasted 21 days, and similar to that instance, we don't expect this to be a long-term issue."

"It's natural for the public to be concerned, but the real estate market should remain unchanged," he said, adding that interest rates will continue to remain stable.