Local mortgage lenders have been rushing in paperwork they will not be able to complete if the federal government shuts down.
Lenders need to verify Social Security numbers and obtain Internal Revenue Service transcripts in order to process home loans, said Scott Swinford with Sagamore Home Mortgage in Merrillville. They have been hurrying in requests for that information to advance any mortgage loans already in the pipeline, because a shutdown would make it impossible to get new loans approved.
"There certainly will be an effect if the government shuts down," Swinford said. "It'll be like a holding pattern for aircraft."
Lenders could continue to start applications for new mortgages, and would still be able to do credit checks, Swinford said. But pending loans would be delayed indefinitely without the proper federal documentation, and that potentially could have an impact of the real estate market if the shutdown stretched on for long enough, he said.
"Without getting that information, we can't put the loans through to the underwriters," he said. "If the government shuts down those two agencies, it will be really difficult. We're trying to order that information now in preparation, as if the government won't be available tomorrow."
Under current rules, every loan requires the verification by the Internal Revenue Service of at least one of the tax returns the borrower presents to the lender. That typically takes about 24 hours to 48 hours, said Thomas Zoellner, of Academy Mortage Corp., in Crown Point.
But mortgage lenders would be left with no way to confirm tax returns in order to verify income if Internal Revenue Service employees are not working, he said.