The US Government reopened yesterday, October 17th 2013……so why might there STILL be closing delays on real estate purchases? Mortgage lenders need the IRS and the Social Security Administration to validate a couple of things when underwriting a loan.
1. the IRS is needed to validate tax returns. Lenders send an IRS form 4506t which allows them to request a copy of tax transcripts. The transcripts are then used to compare to the tax returns provided to the lender. This is more of a fraud preventative measure. Lenders want to make certain that the tax returns the buyer supplied them are the same ones they filed with the IRS.
2. the Social Security Administration validates the buyer’s social security number. self-explanatory, right?
When the US Government shutdown on October 1, 2013 lenders were no longer able to use either of these verification services. Some lenders put a halt on loans altogether, yikes! Other lenders moved forward closing and funding loans, with temporary exceptions. One part of the temporary exception was the requirement of these two verification services once the government reopened – which it did yesterday.
Now, imagine the 16 day back log of all the requests made by lenders nationwide…..in addition to all the new requests going forward. Can you say BOTTLENECK??
Here’s where the problem is – now that the government is back in business (at least until mid January, ugh) lenders will begin requiring these two verifications be included as part of their underwriting approval. However, given the backlog of orders that’s built up from October 1 through October 16, lenders are NOT going to see their normal 1-2 day turn times from the IRS or the Social Security Administration. What to do, what to do??
Some lenders, like AmeriPro Funding, Inc, are still closing & funding loans with alternative documentation supporting social security number verification and tax return filings. Email email@example.com for details.
According to Cole, although the government is reopened, please be mindful that you may experience delays on the way to the closing table. You will want to communicate with ALL parties to the transaction so that contingency plans are made well in advance of the 11th hour.