January 7, 2019
At the time of this writing, the partial government shutdown continues and we are seeing more headlines about the services affected, including certain kinds of home loans.
Specifically, home loan applicants seeking USDA mortgages are locked out of the process for the duration of the shutdown according to a variety of sources. Some potential USDA borrowers were caught in the middle of their transactions when the government shut down, and the media reports stories of those left more or less in limbo until the current situation is resolved.
So what does this mean for FHA mortgage loans?
FHA Mortgage Loans Are Still Available During The Government Shutdown
Forward mortgages will continue to be serviced during the shutdown as previously reported here and elsewhere. But there are some important things you should know. Reverse mortgages are completely unavailable during the shutdown.
FHA loans that cannot be processed using automated means may be delayed, and borrowers who require manual underwriting due to FICO score issues or other concerns should be prepared for a wait.
Borrowers should know that FHA condo project approvals under DELRAP, the Direct Endorsement Lender Review And Approval Process, will still move forward. Condo projects that require review under the HUD Review And Approval Process or HRAP will not move forward at all during the shutdown.
This may be confusing to some FHA loan applicants; why are FHA mortgage loans available during the government shutdown while USDA loans are not? Aren’t they both government-backed loans and doesn’t the government shutdown affect both government agencies the same?
In short, no, the shutdown does not affect the FHA the same as it does the USDA loan program. Both government agencies have their own contingency plans to deal with such circumstances, but those plans aren’t standardized for all government offices.
Instead, each agency must pick and choose the most critical operations needed to remain functioning. The FHA’s plans address their most critical needs, which includes the ability to allow new FHA home loans that can be underwritten automatically to move forward.
Home loans that require additional FHA involvement may be delayed, and that’s a factor all with lower FICO scores or “thin credit” (a small credit history or only one or two credit accounts that don’t have a long history) should be aware of-there may be additional waiting time for such loans until the government shutdown impasse can be resolved.
Bottom line-it’s not safe to assume you won’t be able to get a home loan with an FHA mortgage, but you should definitely talk to a participating lender to discuss processing times and other concerns that may be active while the partial shutdown continues.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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