The Government Shutdown & Real Estate Investing

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The federal government shutdown began October 1, 2013. The shutdown has already affected borrowers, the housing market and the national economy. According to Mark Zandi, Moody’s Analytics chief economist, the shutdown could cause severe consequences if it is not resolved and the debt ceiling is not raised by October 17th, the day when the government is expected to run out of money.

As the federal government shutdown continues, real estate deals are becoming delayed. The IRS is closed which affects lenders’ ability to verify borrowers’ income via a 4506, a necessary step now in most conventional mortgage lending. The IRS will not process any forms during the shutdown, and loans where tax transcripts are required, such as jumbo loans, are particularly tenuous. Expect delays even after the government reopens due to the lack-log in 4506 requests submitted during the shutdown.

Government programs, such as FHA, VA and USDA loans, which require numerous documents, will be delayed. For rehabbers, HUD and other government agencies may not negotiate new purchase offers, thus cutting into supply of foreclosed property truly available. Also expect delays for loans in the pipeline that require HUD's approval for settlement statements and other similar negotiations. The HUD interruption also means condo approvals will be jeopardized.

What are your thoughts about the government shutdown and real estate investing?