Mortgage Rates Are Down (Now What?)
On one hand, the good news with the current government shutdown is that mortgage rates have dropped. You can find a 30-year fixed rate mortgage with an interest rate of 4.22 percent and five-year adjustable mortgages at 3.03 percent.
Unfortunately, the bad news is that with the government shutdown, mortgage loans will be slow to process. The longer the shutdown, the bigger the backlog.
The reason for the delay is that a certain form is needed from the Internal Revenue Service (IRS). This form, known as the 4506-T tax verification transcript, is required by the majority of mortgage lenders. The lenders use this document to verify whether information provided by borrowers is accurate (specifically, tax return information).
Adding to the problem is the fact that lenders also require verification of a borrower’s Social Security number. Both the IRS and the Social Security Administration are affected by the shutdown.
Without these two vital pieces of government verified information, institutions that provide mortgage loans are finding that loan processing is basically impossible. It’s not just banks that are affected — borrowers who are seeking loans through the Federal Housing Administration (FHA) are also impacted. If a buyer needs flood insurance, the shutdown means that the Federal Emergency Management Agency (FEMA) won’t be able to provide that insurance. (Note: FEMA is able to operate for disaster relief and other emergencies.)
Now back to the good news: trends show that most mortgage loans are closed at the end of the month than at any other time, so provided the government shutdown ends soon, the long-term impact on home buying shouldn’t be hugely disruptive.
US 30 Year Mortgage Rate data by YCharts
