Government shutdown putting many mortgages on hold

Government shutdown putting many mortgages on hold »Play Video

Portland, Ore. – If you're trying to buy or sell a home during the government shutdown – good luck, mortgage approvals are getting delayed indefinitely.

Anyone who's applying for a mortgage could be in trouble because lenders rely on information from the IRS. The IRS is closed for business right now and without that critical information from the IRS, the odds are there will be no loans.

Realtors and lenders in Portland say that a couple days of a government shutdown shouldn't be a big problem for the housing market. But a long-term shutdown could trigger a domino effect: More loans will fall through and closing dates will be delayed, which creates uncertainty in the housing market.

"I would describe it as a definite delay, and in real estate, time is of the essence," said real estate agent, Stephanie Lundin. "There's always kind of an imminent need to act and when the shop's not open, I think people are really curious wondering if they're going to be wasting their time looking at homes they can't compete on."

Craig Davis, with Pinnacle Capital Mortgage Corp., says they can cope with the delay for a few days but they can only stall for so long. The bottom line is the funding for mortgages won't happen without the federal government up and running.

That means there may be fewer "sold" signs seen around town.

All USDA loans, also known as rural housing loans, will also be on hold because the USDA is shut down.

The longer the shutdown, the greater the backlog will be after the government gets up and running again. The USDA, the IRS and the FHA will be so backlogged with paperwork that it could cause delays for some time after the shutdown ends.

If you've submitted a mortgage application, you need to check with your lender to see where you are in the application process. If the lender has already received the required tax verification documents from the IRS, you might be OK.