Congress has failed to approve a Continuing Resolution (CR) providing funding for most government operations. Therefore, spending authority for most of the government expired at midnight on January 19, 2018. Until legislation providing for funding is signed into law, many offices and programs of the federal government are now shut down. This means many, but not all, government programs, including some that impact federal housing and mortgage programs, have been suspended or slowed due to the lapse in government funding. The Office of Management and Budget (OMB) requires each agency to have contingency plans in place. The information below is based on NAR staff review of agency contingency plans for the current shutdown and past experience with previous shutdowns and near-shutdowns.
NFIP National Flood Insurance Program
An extension of the National Flood Insurance Program (NFIP) was attached to the CR that Congress failed to pass. This means that for the duration of the shutdown, the NFIP will not be able to issue new or renew flood insurance policies. However, existing policies will not be affected until 30 days after their expiration date. Homebuyers will also be able to assume existing policies and claims will continue to be processed and paid as usual. For more detailed information, FEMA’s latest guidance to insurance companies can be found here(link is external).
HUD’s Contingency Plan states that FHA will endorse new loans in the Single Family Mortgage Loan Program except for HECM loans. It will not make new commitments in the Multi-family Program during the shutdown. FHA will maintain operational activities including paying claims and collecting premiums. FHA Contractors managing the REO/HUD Homes portfolio can continue to operate. Loss mitigation programs will continue to operate. You can expect some delays with FHA processing due to short staffing. (See the HUD Contingency Plan for Possible Lapse in Appropriations(link is external) for more info.)
Government Sponsored Enterprises
During previous shutdowns, Fannie Mae and Freddie Mac have continued normal operations, just as their regulator, the Federal Housing Finance Agency, since they are not reliant on appropriated funds. Fannie and Freddie are expected to announce relaxed procedures that would permit closings to go forward without federal verification of Social Security numbers and IRS tax transcripts. However, lenders would still have to obtain federal verification of both before the GSE’s will accept loans for purchase. Any relaxed requirements would not apply to loan modification re-financings.
Rural Housing Programs
The U.S. Department of Agriculture will not issue new rural housing Direct Loans or Guaranteed Loans. Scheduled closings of Direct Loans will not occur. Scheduled closings of Guaranteed Loans without the guarantee previously issued would be closed at the lender’s own risk.
VA Loan Guaranty Program
The VA loan guaranty program will be operational. The VA has determined that housing is an “essential service.” In addition, VA projects that “95.5% of VA employees would either be fully funded or required to perform excepted functions during a shutdown” (Download the VA Contingency Plan here(link is external) for more info.)
Internal Revenue Service
The IRS is closed and has suspended the processing of all forms, including requests for tax return transcripts (Form 4506T). While FHA and VA do not require these transcripts, they are required by many lenders for many kinds of loans, including FHA and VA, so delays can be expected if the shutdown is protracted. We have received indications that many loan originators are adopting revised policies during the shutdown, such as allowing for processing and closings with income verification to follow, as long as the borrower has signed a Form 4506T requesting IRS tax transcripts. On loans requiring a Form 4506T Fannie Mae and Freddie Mac are expected to adopt relaxed provisions allowing closings but subject to tax transcript verification before the GSE’s purchase the loans.
Social Security Administration
The Social Security Administration is closed and has suspended most customer service functions. According to the SSA Contingency Plan, verifying Social Security numbers through the Consent Based SSN Verification Service will also be suspended during the shutdown, a further complication for mortgage processing. As with IRS income verification, policies vary among lenders, with many choosing to exercise forbearance during the shutdown period subject to subsequent verification. Fannie Mae and Freddie Mac are expected to adopt policies to allow for closing subject to subsequent verification and before GSE purchase of the loan.
Upfront Guarantee Fee and Monthly/Annual Fee Decrease
USDA has announced a reduction in the upfront guarantee fee and monthly/annual fee for fiscal year (FY) 2017 effective with Conditional Commitments issued on or after October 1, 2016 through September 30, 2017. The current and new reduced fees are as follows:
USDA Rural Development Reducing Guarantee and Annual Fees in October:
Effective October 1, 2016 (the start of fiscal year 2017) program fees for USDA Rural Development’s guaranteed home loan program will be significantly reduced.
The upfront guarantee fee will change from 2.75% to 1.0% of the loan amount.
The annual fee will change from 0.50% to 0.35% of the average scheduled unpaid principal balance for the life of the loan.
The new fee structure will save homebuyers thousands of dollars up front and reduce monthly payments significantly.
For More Information about the USDA program call:
Dean Henderson, CRMS
Financial Independence Mortgage
by Dean Henderson, Certified Military Housing Specialist
As our market tightens up and seller concessions are becoming more difficult to get I am getting many questions about what to ask for when writing a VA loan offer. There are several fees a Veteran is forbidden to pay for in a VA loan financed transaction regardless of their willingness to pay. When writing an offer on a home using VA financing a buyer must ask for at least a minimum amount of concessions to cover the VA Buyer’s Non-Allowable costs and Fees.
When using the standard C.A.R. form RPA-CA I would suggest the following wording on page 1, line 3D Additional Financing Terms: “Seller to pay 3% towards buyer’s recurring & non-recurring closing costs and VA Buyer Non-Allowable Fees.”
The actual percentage you request is negotiable but make sure you have enough to cover all the VA non-allowables.
Here is a summary of allowable and non-allowable costs from The Department of Veteran Affairs.
ALLOWABLE CLOSING COSTS
A Veteran may pay any of the following reasonable closing costs and fees:
1% origination fee
Reasonable and customary loan discount points
VA appraisal fee – Usually about $450 for a Single Family Residence
VA compliance inspector fees – Only if required by the NOV (Notice of Value)
Recording fees- Usually about $100 – $150
Taxes and stamps
Credit report fees – Financial Independence Mortgage does not charge for this
Insurances (hazard and flood, when required)
Flood zone determination
Well and septic inspection fees
Survey, if required by lender or veteran, except for surveys of condominiums
Title insurance(ALTA), title examination, title endorsement, title policy, title search
Environmental protection lien endorsement
VA funding fee – This is usually financed in the loan
Closing protection letter – Should not exceed $35
Fraud protection report
Termite, provided the loan is a cash-out refinance – The borrower may never pay these fees for purchase transactions
If a fee is not listed above, assume VA does NOT permit the veteran to pay it
NON-ALLOWABLE BORROWER-PAID CLOSING COSTS
Generally, the veteran may NOT pay any of the fees listed below. The seller must pay the non-allowable fees.
The non-allowable fees are:
Attorney fees other than for title commitments
Lender’s inspections, except construction loan inspections and inspections required on the appraisal/NOV
Loan closing or settlement/escrow fees
Doc prep, underwriting, loan application, admin or processing fees
Interest rate lock-in fees
E-Mail, fax, copying, postage, stationery, telephone or other overhead charges
Amortization schedules, Truth-in-Lending fees, etc.
Escrow fees or charges
Commitment fees or marketing fees of secondary purchasers
Fees charged by third parties, regardless of affiliation with lender
Tax service fees
Termite inspection fee for a purchase transaction
Attorney fee that benefits the lender
Real Estate Broker fee or Transaction Coordinator Fees
Brokerage fees or commissions charged by real estate agents or real estate brokers in connection with a VA loan
Prepayment penalties financed through a refinance transaction – When the payoff states a pre-payment penalty is due, veterans may pay pre-payment penalties out-of-pocket only
FHA/VA inspection fees for builders (Normal new construction inspections of the dwelling are permitted when required by the appraiser)
Any portion of the seller’s lien(s) or short sale fees
For purchase transactions, the cost of required repairs and inspections must be paid by the seller. This policy applies to all purchases, including purchases of REO properties. VA does not permit the veteran to pay for repairs other than minor termite damage repairs.
For more information about VA Home Loans please contact:
Dean Henderson, CRMS, GRI, CMHS
Certified Military Housing Specialist