Skip to comments.Govít Shutdown Could Bring OC Real Estate Market To Standstill
Posted on 10/05/2013 9:34:46 AM PDT by BenLurkin
COSTA MESA (CBSLA.com) The government shutdown could bring the Orange County real estate market to a standstill.
We have to verify tax returns through the Internal Revenue Service for all loan transactions, and so we cant do that right now with the government being shut down, said mortgage broker, Lauren Stipe.
Stipe said buyers cant get a loan without the 4506 forms.
(I have clients) waiting and, basically, hoping that well get the results back in time for them to close escrow on time, she said.
Stipe is hopeful the shutdown will end soon. But if it doesnt, shes worried buyers will fall out of escrow and be forced to cancel their contracts.
I think worst case scenario, if they remove loan contingencies, they have the potential of losing their deposit on the house, she said.
KCAL9s Stacey Butler reported that so far, there have been few disruptions. Most loans close at the end of the month and take 30 to 60 days.
Traditional loans arent the only ones affected.
Loans backed by agencies like the Federal Housing Administration could also be in jeopardy as the FHAs diminished staff struggles to keep up with processing.
Im hoping that like previous situations, theyll resolve it within a matter of days, said Stipe.
BINGO!! THAT is going to be the end result of all these sob stories....the GOVT. IS TOO DAMN BIG!!!!!
My first thought as well. Government shouldn’t be involved in the housing market at all.
Just another example of the government being TOO BIG! The government shouldn’t be involved in real estate sales. It’s not in the Constitution.
The 4506T audits are a big deal for mortgage lending. We send in the signed 4506 form to the IRS.
The IRS then send back to us a transcript of someones tax return with all the data from their return.
We match that up with tax returns W2’s or paystubs (all of which could potentially be fake) we have collected from a borrower.
It is a way to detect possible loan fraud.
So yes the govt has it’s fingers in too many things; but this isn’t one of them.
Call your commie 'critters and tell them to fold.
In an area plagued with earthquakes and mudslides a real estate standstill is a good thing.
Bring it on --
Somehow people bought and sold land in America for hundreds of years before the mortgage world decided they needed a federal police force to do their due diligence for them.
Why isn’t a triple agency credit report enough for you?
Is the 4506 required by federal regulation?
Would you just fold and go out of business if you didn’t have it?
Just because someone, somewhere benefits from an overly intrusive government does NOT mean that it is justified.
Isn’t it amazing that the feral government has its nose in everyone’s business to this extent. Shame on we, the sheeple, who have allowed this rapacious government to run wild.
And the Government Shutdown COULD make monkeys fly out of my butt.
Government does a fine job of bribing supporters.
The people who are easily bought have been with us since the beginning. In the 1700s they turned their neighbors in to the king for their 30 pieces of silver. Today they do the same for other payoffs.
The Democrats may get confused. They will now have to decide whether to blame their failures on the partial shutdown, Bush or global warming.
I have been connecting some other dots....
The shutdown is a problem when the Feds have so many fingers in the pie, no doubt.
BUT—When Obamacare kicks in & people find out how expensive it is going to be & how high a series of decuctibles there are:
What will they have to give up?
Many homeowners who are already paying mortgages on proof of money they earned before their hours were cut to 30 per week will have to make some choices.
They are earning less & will have to pay seriously spiked premiums for ‘health care’.
Will they give up their cell phone plans? A penalty connected to that, for sure.
Will they turn in their newer car & drive an older one instead? Fat chance. They have been brainwashed to believe that only the NEW cars are safe!!!
Will they give up the beauty parlor & manicures? Not betting on that.
350 channels on their TV? Not so sure about that, either.
Dining out & family gatherings?? No—not that.
Will they find themselves paying their mortgages later & later??? Perhaps. There isn’t as much instant gratification with a mortgage payment as there is with a cell phone or a new haircut.
This will start another complete round of foreclosures-—just when the home market was starting to feel a little better.
Watch what happens-—within another year, before the 2014 elections, the foreclosures will go waaaay back up.
See if I am wrong. Remember I have said this.
Credit reports have nothing to do income verification.
W2’s; paystubs can easily be created in Photoshop.
Government regulations DEMAND this type of verification is done.
Don’t blame lenders for doing what they are required to do.
The regulation is a pain the ass for all of on the lending side.
If you get a loan as a customer; you just have to complain about on your loan and be done with it. Every loan I deal with I have to deal with this stuff, not fun at times.
And yes we can’t make a loan without this. It’s actually one thing however that makes some sense; as it will stop some loan fraud.
The lenders aren’t cheering to do however; as it adds costs and time and complexity to the process.
Makes me feel kinda blessed to have been raised poor.
Things have got to get pretty bad before “hardship” becomes depressing. Basically I’d have to reach the point of living in my van and even that might be tolerable.
You seem to be a creature of your age.
In the 1970s we sold cars, trucks, houses and land on credit with zero government involvement. Well, there was the County Recorder.
“Identity theft” is a crime only known in the age of mass illegal immigration. Another charming feature of Mexico that has changed the U.S. in ugly ways.
Income fraud used to be easy to check: you just called the guy’s employer and asked them what he made. That’s probably illegal now, right?
Self Employed had to provide accountant reports. Don’t got one? Fine. Put down 30%.
And if you don’t make the payments...meet Vinnie, our Repo guy.
I have no idea why you think you need a federal agency to do these things. Have been in and out of sales in all sorts of businesses over the decades and not once do I recall needing some jerk who got his job with federal points to make it work.
We just did a refi on our home. The lenders are assuming you are lying about everything and you have to provide 2 different ways to backup your info. In our case my wife recently retired and takes a draw on her reinvested profit sharing account. The lender requested a letter stating the draw agreement had been set up and she had to prove the draw had been made.
She recently had bought out a car lease, she provided the satisfied lease agreement and had to prove that Toyota had been paid for the car.
The whole thing has gotten ridiculous thanks to Barney Frank.
Very few people believe me when I tell them that, for the most part, the young , or those that are considered to be young [college students, high schoolers and grads] do not know how to wipe their butts unless instructed by a Governmental Bureaucrat.
This is why we need implanted microchips and a single master government account for each citizen unit. It would make things like mortgage applications far more efficient.
I had no idea. We just got loan pre-approval this week after submitting our the returns our CPA did along with W-2s etc. So we couldn’t actually buy a house until the government is back up and running? I can understand the bank wanting to verify income but why do they have to get the same info back from the IRS? Was this instigated by the IRS?
I hate the goons at the IRS having so much control.
Ha ha. And racism. And the 2nd amendment. And talk radio. And homeschoolers.
the IRS is not the only means for verifying income
and if some state or bank has made it a rule that
ONLY an income tax returned can be used to verify
income then that state and or bank have created
their own problem
The federal government IS the housing market, and has been for as long as anyone here can remember.
Of course, that has caused boom-bust credit cycles, inflation and reduced growth, so it must be cut back.
“I have no idea why you think you need a federal agency to do these things”
Well it’s not the 70’s anymore. In the 70’s lenders had the flexibility to make common sense decisions and get things done. That isn’t the case anymore.
You don’t seem to understand that the federal government REQUIRES this to done. A lender can’t just decide to “do it their way” and say screw the government.
You can’t go into business as a mortgage lender and say to heck with all the regulation and do things your way.
You seem to think lenders choose to do these just to have fun; not the case.
It’s dictated by the fed
Taxpayers need to "bite the bullet," to use Ogilvie's expression, and build up their taxable income for two years before they can qualify for a loan. Some may have to forgo deductions to which they believe they are entitled and pay more income tax so they can show more income on their tax return to qualify for a loan.
In other words, pay excess taxes to the government so we can get a loan.
We live in a Gulag.
Regarding one of the apparent issues that lenders might have with the partial shutdown, I received this note: "Regarding the need for Tax transcripts...The requirement for the actual transcripts is an investor overlay, the Agencies only require that the form to pull transcripts is in the file, not that transcripts have been pulled, that said, most pull them as part of the QC process."
Wells Fargo's retail originators are "full speed ahead," and yesterday received, "Good morning everyone. I wanted to send you all a quick note on how we will be directing fulfillment when they are not able to obtain the 4506T transcript and the loan is scheduled to close. Credit Policy has come to the agreement that all we need in the file is the signed and dated form 4506T. Here is the process we would like fulfillment to follow: If your loan was selected for audit, is scheduled to close today, and a transcript is not in file then; 1. Fulfillment Underwriter should enter the following note: 'Loan is scheduled for closing today, due to the government shut-down we are unable to obtain the required 4506T transcript. There is a signed and dated form 4506T in file. Per credit policy, it is acceptable to close the loan without the transcript during the government shutdown.' 2. Fulfillment Underwriter should waive the condition and proceed to closing. No MLM Waiver is required." (This was sent by Kathy Smith, Retail Loss Prevention Lending Manager.)
Wells' correspondent clients received, "Wells Fargo Funding will not make any changes to documentation requirements in the event that a shutdown occurs and will continue to require documentation including, but not limited to: Tax Return Transcripts for all borrowers which must be included in the Loan file if income was used in the underwriting decision."
U.S. Bank Home Mortgage (USBHM), on the 4506T IRS Tax Transcript situation, wrote, "The IRS will not issue tax return transcripts (Form 4506 T). For the short term, we will temporarily cease the requirement for tax transcripts. However, we will require that the form 4506 T still be executed by the borrower(s) and contained in the file for future use. Please note: USBHM will re verify income with the IRS on all files delivered without tax transcripts due to the shutdown. This policy will be strictly adhered to. Direct Social Security Number Verification: Direct SSN verification may be not be available. If you are not able to establish SSN ownership, we will not be able to move forward with the transaction until this service is available. Rural Housing: USDA has ceased all but essential functions therefore USBHM will not purchase any USDA / Guaranteed Rural Housing (Program #3001) loans without a guarantee and/or Conditional Commitment."
Stearns Lending broadcast, "The four (4) areas of our business that are most affected by this shutdown are: USDA Rural Development, obtaining IRS Transcripts, Social Security Number verification, and obtaining flood insurance. USDA Rural Development...Effective immediately, we will begin requiring copies of borrower's tax returns for all borrowers utilizing income to qualify. All Underwriters will begin conditioning loans for same. This will not apply to loan products that do not utilize income to qualify. The tax returns will enable us to identify self-employed borrowers; borrowers that claim 2106 expense and borrower's that own multiple properties. We will not require an executed 4506T prior to funding on W2 salaried borrowers to be included in the loan file. Stearns will verify all income with the IRS utilizing the executed 4506T and obtain the tax transcripts once the shutdown is over. We reserve the right to change this temporary policy at any time. The following loan types will require IRS transcripts in the file before we can close the loan: Jumbo Loans, loans where the borrower owns multiple properties, and self-employed borrowers. There will be no exceptions."
Fairway Independent Mortgage Corporation originators received, "Agencies that have been deemed essential with no likely impact on lending: Federal Reserve Banks - expect zero impact on our ability to send and receive wires through Fedwire, FNMA & FHLMC - MBS trading, security issuances, guaranty, loan purchasing and loan servicing functions should all remain intact. Desktop Underwriter, EarlyCheck, and Uniform Collateral Data Portal should all remain functional, GNMA - expect no impact to security issuances or MBS trading functionality, VA - announced in circular 26-13-20 that the VA Home Loan Program would function as normal in the event of shutdown..." Fairway goes on to say, "Agencies where there can be minor impacts on production: Social Security Administration - the SSA has indicated their staff will be reduced significantly and the service they offer to verify identity/social security numbers via the SSA-89 form, IRS - We will not have the ability to verify Tax Transcripts, however, we have made a Corporate decision to proceed without verifications on loans we are able to underwrite internally. And Agencies where there can be significant impacts on production: USDA -Effective immediately, USDA Rural Development office personnel is on furlough until further notice. GUS underwriting engine has been placed in inactive status. Pending mortgage loan transactions, where a USDA Conditional Commitment (RD 1980-18) has not been issued by the agency, will be unable to proceed to closing until the USDA office is operational and able to issue Conditional Commitments. How will this impact a USDA loan transaction? Fairway Independent Mortgage Corporation has delegated underwriting authority for USDA's Guaranteed Rural Housing loan program. A USDA loan transaction is underwritten by our in house underwriting staff for qualification purposes. Use of GUS, USDA's automated underwriting engine, is a part of the underwriting process. FIMC's underwriting staff will continue to review USDA mortgage loan transactions and will render a conditional decision based on being able to update the GUS underwriting engine and receipt of USDA Conditional Commitment RD 1980-18. Due to the government shutdown, the GUS system is inactive and USDA personnel are not able to facilitate the issuance of a Conditional Commitment. A USDA loan is unable to proceed to closing until the USDA offices are reinstated which will only happen upon Congressional resolve."
Stratis wrote, "While the IRS is not completing IRS Form 4506 results, most of our loans that we fund as Stratis Financial will not be impacted. The requirement is suspended with exception of non-owner occupied loans under the Fannie Mae multiple property program. As well with these same files approval and funding will not be slowed down waiting for Social Security number verification with the exception of files in which the Fannie Mae or Freddie Mac AUS results indicate some discrepancy. With the few files Stratis Financial brokers, approximately 10%, delays are likely to occur due to the lack of IRS and Social Security Administration verifications."
Nationstar correspondents received, "As referenced in the Correspondent Seller Guide, IRS Tax transcripts using the 4506-T are required to validate the income for all borrowers. Additionally, Nationstar correspondent requires the number of years of income documentation as indicated in the Income Section of the Sellers Guide. Due to the recent United States Federal government shutdown, federal employees across the United States may be affected, including employees who work for government contractors, vendors, and other businesses that rely on work from government agencies, or that offer goods and services to members of the government work force. To that end, effective immediately, Nationstar Correspondent will temporarily suspend the requirement for IRS Tax Transcripts using the 4506-T until further notice, unless the transcripts are a requirement by the agencies (i.e. AUS requirements). Nationstar Correspondent will continue to purchase closed loans submitted for purchase provided all borrowers have executed a 4506-T form at the time of application and again at loan closing. As a reminder, signed tax returns are still required for all self-employed income and income that requires tax returns by AUS findings. Borrowers are still required to sign IRS form 4506-T."
Affiliated reported, "The Following guideline changes regarding Validated Tax Transcripts only affect loans with properties located in the following states. If your property is in a state not listed below, Tax Transcripts are still required in order for Affiliated to purchase the loan. Acceptable States for Exception for Tax Transcripts: AR, AZ, CO, CT, DE, FL, GA, IA, ID, IN, KS, KY, LA, ME, MN, MO, MS, MT, NC, ND, NE, NM, NV, OH, OK, OR, PA, SC, SD, TN, TX, UT, VA, VT, WI, WV, WY. Since the U.S Government is not issuing Validated Tax Transcripts currently, until further notice Affiliated will take the following in lieu: DU/LP Eligible - If DU/LP does not require tax returns (typically when the borrower(s) are salaried and W-2'd) then AMC will accept the findings; however, in addition to any requirements by DU/LP, Affiliated will accept if the loan file also includes a signed and dated copy of the Borrowers' 2012 Federal Tax Returns (1040) along with all Schedules and Forms. In addition the loan file must include a fully executed 4506-T form signed and dated at closing. If DU/LP requires tax returns we will adhere to those findings, but the fully executed 4506-T form still must be provided as well. If the subject property is a Second Home or an Investment Property AND the borrower has more than four (4) financed properties (including the homestead) the loan is ineligible without validated Tax Returns. This is a direct FNMA ruling until further notice."
CitiBank correspondents were alerted, "Form 4506T: IRS transcripts are not available during the shutdown period. During the shutdown period the IRS Form 4506T should continue to be signed at application and closing, and the tax returns should be used to calculate income per current policy. During the government shutdown period tax transcripts are only required in accordance with the 5-10 financed properties policy when the loan is delivered to Citi (per Correspondent Manual Section 809.) Refer to Correspondent Manual Section 805 for current policy for Processing and Analyzing the 4506T. Social Security Number Validation: There is no change to current process. Loans that require Social Security number validation must include Social Security Administration (SSA) Form SSA-89 when delivered to Citi for purchase consideration. Refer to Correspondent Manual Section 807 for Social Security Number Validation Requirements.
This would only apply to someone self employed. If someone is self employed; we just use the net (bottom of the return after expenses) income on the return, and will average the last 2 years.
Depreciation can be added back in as that is not a cash expense.
So the statement you quoted may have some validity for a small chunk of people.
Where are you from? OC is not plagued with serious earthquakes, and most of it has zero places for mud to slide. Oh, and no rain. Why can’t we sell our homes?? Who are you to disparage us?
FReepers are reacting to your original post which indicated that you are in favor of the IRS’ verifying income because it reduced risk of fraud to the banking industry.
You haven’t addressed that in any subsequent post except by saying ‘we’re forced to do this’.
Your first statement is the problem. You support the gov’t intererence because it benefits you.
“You support the govt intererence because it benefits you.”
That is a false statement. The industry is REQUIRED to use this process. I support my industry being able to function.
You are a voter; you don’t like the requirement; go out and get elected and roll back the regulation.
Honestly I figured since I work in this industry, some here might appreciate some fact based information so I tried to enlighten.
Facts are facts; like em or not.
If you are a food manufacturer and you need a certain govt function to move your product; you would want that function to work smoothly.
That doesn’t mean you don’t work on a another track to elect politicians that favor more intelligent regulation.
In the mean time you have a business to run.
Surely thou jeste —
So you are going to tell us that you don’t have earthquakes or mudslides after brushfires in Southern California????
I lived there — I know first hand of both.
Would you like me to put you in touch with the Southern California Earthquake Center to help you with some ground shaking facts.
And I am also fully aware of all the mudslides from the winter rains in the hills of Southern California especially after the brushfires:
Laguna Beach is in Orange County, isn’t it???
Your work is being subsidized by the taxpayers who pay for all this baloney. You remind me of the typical I’m just doing my job flunky.
Its dictated by the fed
you mean its dictated by “The Federal Reserve” as in “banking regulations” that come under the Federal Reserve’s role in banking regulayion???
if so, it is rule made by and for big banks and big government, for them, but anyone who deals with the credit rating industry on a professional basis knows it is unnecessary - there are other means to inquiring about and verifying income
You are full of it. If you drive on an interstate highway; you are being subsidized by the taxpayers.
I thought only the Occupy types were that ignorant.
Just keep calling people names who feed you. You ain’t that bright. Crony capitalist.
Lets hear how how your income is derived. I will tell you 6 ways you are being subsidized by the taxpayer.
Lets hear it:
Keep digging, you are almost to China.
Great answer; you won’t answer a simple question.
You are now arguing like a Liberal. DU might be a better place to vent your poor attitude.
As I thought; you won’t give an answer.
You might want to sit and think about how government services are embedded in how your income is derived.
Instead of playing keyboard cowboy with someone who is trying to bring a bit of first hand knowledge with how things actually work; try getting out and trying to change things so less government is required for all of us.
You are dangerously close to Zot.
So you have been backed into a corner in an argument; and you try to hide behind what you just wrote. Fine.
It shows someone that is not capable of intelligently discussing an issue using actual facts rather than emotions.
You gave out private information on the interweb, so who is the dummy. Not playing your silly LIBERAL word games. You are a bore.
Nor student loans
I gave out no private information.
I provided actual facts about how an industry works that I am in.
The goal is that my fellow conservatives know facts. I like hearing from people in other of industries how things work so I am more knowledgeable. You chose to attack me for providing such info; strange.
I asked the question about your income; as most people in this country are tied somehow to govt services or regulation.’ like it or not.
The answer is to call your representatives and tell them we have too much regulation and govt control. Or to get new ones elected.
I have stood toe to toe with Occupy protestors and challenged their stupid signs and chants.
They were perplexed anyone would challenge them; and had no answers for my questions.
You did provide useful information to the thread. I’m with you fellers.
Que “Oh brother, where art thou?”
Is that you Barry? Changing your tune again. We got the information you are a crony capitalist.