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Utahns' home loans still going through — mostly

Published October 3, 2013 11:43 pm

Housing • Shutdown causing some snags, but many lenders are working around them.
This is an archived article that was published on sltrib.com in 2013, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

The U.S. government closure and worker furloughs are not affecting the bulk of Utah's home loans — which isn't to say there are no glitches.

"Most homebuyers who need a mortgage will be able to secure one, even during the government shutdown,'' said Dave Anderton, spokesman for the Salt Lake Board of Realtors.

Two major public lending agencies — Fannie Mae and Freddie Mac — continue to operate as usual because they do not rely on funds allocated in the stalled federal budget.

The Federal Housing Administration, meanwhile, is still processing loans but with a skeletal staff, which could lead to delays, especially if the shutdown drags on past a week.

FHA is an arm of the U.S. Department of Housing and Urban Development (HUD) which has temporarily sent home all but about 2 percent of its nearly 3,000 employees.

FHA has suspended new loans on deals involving multifamily dwellings — primarily condominiums — but continues to endorse new lending on mortgages for single-family homes. Those make up most of its real-estate business in Utah and nationwide.

Two other federal agencies with smaller loan volumes in Utah are being affected.

The U.S. Department of Veterans Affairs backs some home mortgages in Utah and promises to still process paperwork, but warns of potential delays.

The U.S. Department of Agriculture, which supports mortgages on homes in rural Utah, has sent home field office staff and is halting work on all loans without a conditional commitment. Loans with a commitment, good for 90 days, already have money set aside for lenders to close as planned.

One big mortgage-lending hitch posed by the shutdown involves the Internal Revenue Service, which issues a document called Form 4506-T.

This form allows lenders to verify borrowers' incomes as part of the loan-approval process, a step the FHA, the V.A., many banks and other private-sector lenders require after widespread income fraud that contributed to the 2008 housing market collapse.

But the IRS is shut down, including its major processing center in Ogden. Loans near closing when the government closed Tuesday probably had the form completed, but new loans could be held up without the 4506-T and verification.

U.S. Bank, a significant lender in Utah, has temporarily suspended tax-return verification to keep loans flowing. But borrowers still will have their income verified once government services resume, the bank said Wednesday.

Wells Fargo will let loans close without formal IRS verification during the shutdown — as long as a signed and dated 4506-T for the loan is on file.

Most major banks are adopting similar policies for now. And there are other ways around the tax-form problem.

Fannie Mae and Freddie Mac don't mandate an IRS tax-return review, and large numbers of privately issued home loans here and across the country are ultimately sold to those federal agencies, freeing them of the requirement.

Home loans could be affected if borrowers need to prove their Social Security number is valid; the Social Security Administration has suspended customer services. But many lenders rely on private commercial companies for this service.

"It might delay a loan," Anderton said, "but it's not going to derail it."