It might be more of a pain, but Fannie Mae says that lenders can continue to originate mortgages during a government shutdown that has no end in sight.
The Federal National Mortgage Association — commonly known as Fannie Mae — issued guidance to lenders on how to verify employment, Social Security number and more amid the shutdown, which is now in its 17th day. The shutdown could leave some home closings in jeopardy as the United States Congress continues to fight on a spending bill to fund the government and meet President Trump’s shifting priorities.
Fannie offered recommendations on obtaining IRS transcripts and information through the Social Security Administration during the government shutdown. In some cases, tax transcripts from the IRS can be received after closing, Fannie said. A Social Security number, however, must be validated prior to the home sale or Fannie Mae will not purchase the loan, according to Fannie’s own rules.
If the borrower is a government employee, they may face an extra set of challenges. Borrowers who are employed by the government are not ineligible for mortgages during the shutdown, but validating their employment status might be an extra hurdle.
“If a borrower is furloughed on or after closing of the mortgage loan due to the shutdown, the loan remains eligible for sale, provided the lender has been able to obtain all required documentation (for example, pay stubs, IRS W2s, verbal certifications of employment) prior to the delivery of the loan,” according to Fannie.
If lenders can’t verbally verify employment during the shutdown, the lender can then obtain verbal employment verification after the loan closing and up until the time of loan delivery, Fannie said. Borrowers in the military can use a “Leave and Earnings Statement” that is dated within 30 calendar days prior to the note date in place of a verbal verification of employment, Fannie’s guidance says.
The National Flood Insurance Program may have limited ability to issue new policies, issue increased coverage on existing policies, or issue renewal policies during the shutdown, Fannie said. To help ensure the continued availability of mortgage financing to borrowers seeking to purchase properties located in Special Flood Hazard Areas (SFHAs), Fannie will purchase loans secured by properties located in SFHAs that do not have an active flood insurance policy as long as the conditions noted below are met.
Fannie stated that the temporary guidance assumes that the shutdown will be temporary in nature. The policies are effective immediately, but will automatically expire when the federal government resumes full operations. If the shutdown lasts for a prolonged period, Fannie may provide additional guidance.
Fannie Mae is a government-sponsored enterprise that buys loans from mortgage lenders, packages them together, and sells them as a mortgage-backed security to investors on the open market.