By now, most everyone should be aware that the stalled budget talks in Washington have created a Government shutdown of many “non-essential” services. Fannie Mae and Freddie Mac are not affected by the shutdown. And FHA is operational, but with a significantly reduced staff, which could lead to some delays. The most impactful of shuttered government departments is the IRS. The IRS has been closed since Tuesday when this mess began. Since most all lenders require income verification documents from the IRS, this is causing major problems for homebuyers and those trying to refinance. The good news however, is that many lenders (and most that we at Pinnacle deal with) have temporarily waived the requirement for this information from the IRS. So, for now, it’s business as usual.
Now for the BAD news:
The government shutdown will soon take a back seat to the looming October 17th deadline for the debt ceiling. In a US Treasury statement yesterday, “In the event that a debt limit impasse were to lead to a default, it could have catastrophic effect on not just financial markets but also on job creation, consumer spending and economic growth – with many private sector analysts believing that is could lead to events of the magnitude of late 2008 or worse, and the result then was a recession more severe than any seen since the Great Depression”.
A related statement yesterday from Nashville’s Congressman Jim Cooper described “the government shutdown as playing with dynamite, but risking default is nitroglycerin”.
So what is the GOOD news?
Those of us in the mortgage industry will often say that “bad news is good news”. And this is no exception. With all of the turmoil in Washington, and no encouraging signs of economic rebound any time soon, mortgage rates have fallen to the lowest levels we’ve seen in months. The Fed tapering off of its current mortgage bond purchases will most likely now be put off even farther into the future.
So, now is definitely the time to take advantage of interest rates before they again resume their march higher.