As the government shutdown enters its fifth week, the issues facing mortgage lenders vary from specific, impacting only certain lending institutions, to broad, affecting multiple agencies that have roles in funding loans. The net effect is a slow down in the processing of some loans and, in certain cases, a full-scale stoppage of lending. Mortgage applications spiked 13.5% in mid-January, and are at their highest level in nearly a year, potentially increasing application volume and contributing to additional processing difficulties.
For mortgage marketers, implementing an effective messaging campaign during the shutdown is essential. It is important to provide reassurrance and guidance for buyers during this time of uncertainty, regardless of where they are in the purchasing pipeline.
Most FHA Loans Will Still Be Processed, Although Verification And Processing Delays Are Inevitable
A survey in early January by the National Association of Realtors (NAR) found that 75% of their members didn’t think the shutdown had made an impact on contract signings or closings. Deals are continuing to be made, and closings are moving forward. However, there are effects of the shutdown on mortgage processing that mortgage marketers should keep in mind when communicating with their clients.
The good news is that most FHA loans will continue to be funded. Exceptions include condos that do not have prior FHA approval and multifamily units, which will not be able to secure mortgage insurance during the shutdown or close any deals not scheduled prior to the shutdown.
The IRS IVES Program Should Make Loan Verification Easier During The Shutdown
The most significant issue for loan approval during the shutdown is verification of buyer information, primarily income. Loans that require a tax return transcript (4506T) could face delays while the IRS is more or less closed for business. Without income verification, it can be difficult to finance a loan, particularly for self-employed mortgage applicants. However, as of January 7th, the IRS began using the Income Verification Express Service (IVES) program, which is popular with financial institutions. This service has helped get the wheels moving on approvals, but it’s unlikely the 72-hour turnaround lenders are accustomed to will be met.
Freddie and Fannie Mae Are Dealing with A Backlog Of Verifications But Are Otherwise Unaffected By The Shutdown
Freddie Mac and Fannie Mae are largely unaffected by the shutdown and, now that the IVES program is up and running, any necessary verifications can be processed. As with other agencies, delays are expected due to the buildup of waiting applications.
VA Loans Are Proceeding As Planned Despite Minor Delays
Loans from the Veterans Administration (VA) have not been impacted, because the VA was fully funded for fiscal year 2019 prior to the shutdown. Like the FHA, documentation delays may occur, although the VA has been able to implement solutions to work around backlogs and keep approvals and closings moving through the pipeline.
During The Shutdown The USDA Is Not Signing Off On Loan Commitments
The government shutdown is preventing some lenders and agencies from proceeding with closings or offering new opportunities for mortgages. The U.S Department of Agriculture (USDA) operates the Rural Development program, providing mortgages through private lenders. During the shutdown, the USDA will not be issuing the commitment letters necessary to close USDA loans, leaving applicants unable to proceed with or begin the mortgage process.
The National Flood Insurance Program (NFIP) Is On Hold During The Shutdown
FEMA has decided that the National Flood Insurance Program (NFIP) will not approve flood insurance during the shutdown, potentially affecting the sale of 40,000 homes, according to NAR. This could impact coastal states and other flood areas and may drive buyers to choose to go with private insurers.
Mortgage Marketers Must Provide Reassurance To Worried Borrowers And Not Let The Shutdown Do The Talking
Although there is still much to be confident about regarding the mortgage market throughout the shutdown, consumers are likely to feel anxious and unsure, particularly those at later milestones of the buying process. Mortgage marketers and loan originators should use the shutdown as an opportunity to brand themselves as knowledgable, trustworthy and transparent resources who have successfully navigated choppy waters before. This can be achieved by creating a targeted marketing strategy that gets ahead of the news stories.
Increase Email Marketing During The Government Shutdown
Your regular email marketing should incorporate news and updates about the shutdown, establishing your expertise as a resource. Consider increasing your email volume, particularly since new customers and those already in the pipeline may be seeking you out more frequently for information. Emails about mortgages and home buying during the government shutdown should convey several messages:
- You are aware of buyer concerns and the latest news of the government shutdown. You are ahead of the news.
- For new borrowers, you have additional products and services that may get them through to the next step while the shutdown continues. For instance, a rate lock extension or, if a particular borrower is worried about the effects a long term shutdown could have on FHA loans, a conventional loan that is not FHA but offers similar benefits.
- For customers further along in the home-buying process, offer reassurance that their deals are still being actively managed. A timeline can be helpful in this instance, illustrating different scenarios based on new information, like the implementation of the IVES program.
Use Organic Social Media Updates To Share Government Shutdown News
During the shutdown, consider actively posting social media updates discussing the latest news and changes and confidently addressing consumer concerns. And for more in-depth and targeted information, social media posts on Twitter and Facebook should drive clients to carefully crafted content on your corporate website. Consistent, informed communications throughout the shutdown can establish you as a trusted voice and an advocate for the customer.
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About the AuthorMore Content by Sarah Cavill