The government shutdown is indeed having an impact on San Francisco purchase loans and transactions. Several of my colleagues around town are reporting that lenders are unable to verify tax returns via the IRS (typically required for jumbo and some conventional loans). Additionally, lenders may not be able to get Social Security Administration verification for the purposes of proving buyer identity and reducing potential fraud.
There are definitely reports of open transactions are in holding patterns. As a result, buyers aren’t able to confidently remove financing contingencies—or receive and sign loan documents. In one instance, a seller has a back-up offer for all cash on the table and is seriously considering cancelling the buyer contract with the loan and moving to the back-up offer.
So, yeah—people are starting to freak out. What can buyers, sellers, and their agents do?
Some lenders are changing their policies to address the shutdown. If all other documents are in place, these lenders are closing without IRS transcripts or Social Security Administration verification. If you’re starting your house hunt, find out what the lender policy is for the government verification. You may want to move ahead with a lender that’s willing to close without that verification. (One lender I checked with said that the government has not discontinued the IRS tax transcripts system, so it seems like it’s questionable whether this is an obstacle right now.
If you’re already in escrow and experiencing delays, consider requesting an extension on your loan contingency and switching to a lender that won’t require the verification. This is not ideal, and you may or may not get a comparable loan program. But if you have a seller breathing down your neck, it might be your last recourse.
And sellers should exercise patience as all parties try to come up with a way to proceed.