On October 1, the U.S. federal government shut down, as the two major political parties could not agree on a budget. In effect, this caused some federal employees to be furloughed for an undetermined amount of time.
According to a recent Bloomberg article, this could have a negative impact on the housing recovery. The news source explained that lenders are blocked from verifying Social Security numbers and accessing Internal Revenue Service tax transcripts. This could delay borrowers who were in the process of obtaining home loans.
Additionally, borrowers who are waiting for mortgage approval backed by the Federal Housing Administration could have a longer wait time because that agency’s staff has decreased to one-tenth of its standard size.
Jed Kolko, chief economist for the real estate website Trulio explained to Bloomberg in a September 30 note that the furloughs will first affect spending in metro areas where federal employees make up more than 10 percent of the workforce. This would include Washington; Virginia Beach, Virginia; Dayton, Ohio and Honolulu.
“If the shutdown persists, local economies and housing demand could be hurt—especially in markets where people depend more on federal paychecks,” he said. “At the other extreme, just 1 percent of local wages in New York and San Jose come from federal paychecks.”
While situations such as this are beyond the control of many financial institutions—and might not even affect them directly—it is even more reason why organizations should have the right application processing in place. Regardless of outside forces, potential borrowers deserve to have their application thoroughly investigated.
Additionally, the right loan management software will ensure that once creditworthy borrowers are found, the right payment plan option can be created for them. That way, both parties can remain financially sound.
