By Karen Weise | Bloomberg Businessweek
As the U.S. government shutdown enters its second week, home buyers and sellers are learning just how big a role the federal government plays in the lending process.
Lenders, acting more cautiously in the aftermath of the mortgage meltdown, now often check with the Internal Revenue Service to make sure borrowers earn as much as they claim—the IRS will provide confirmations if the borrowers have given written permission—but since the shutdown the IRS has stopped doing so. Banks also ask the Social Security Administration to verify identities. The Washington Post reported on Friday that the Social Security confirmation is usually done online, but the website is currently down.
Another change since the housing crisis: The federal government has a bigger share of the mortgage market. About a quarter of all mortgages for buying homes are made through the Federal Housing Administration, which provides insurance so borrowers can make lower down payments. The Veterans Benefits Administration and the U.S. Department of Agriculture both also run mortgage programs that allow smaller down payments. Some larger banks can still process these loans on their own, the Los Angeles Times reports, but other lenders must run each loan application by the agencies, which now have smaller staffs.
Related video: The Government Shutdown’s Impact on Housing
