Below are NAR survey results showing how the government shutdown is slowing or killing homebuyer deals.
The first one (buyer decided not to buy) is less relevant to me since those aren’t actually deals yet. But the third one (closing delay due to IRS income verification) is critical.
Besides some exceptions outside the core of federal consumer protection regs, most lenders won’t fund mortgages (for compliance and risk reasons) until the IRS has verified borrower tax filing data. The shutdown is a monkey wrench jamming this giant part of our economic machinery.
How big is the problem?
The latest MBA stats show total 2018 mortgage originations at $1.643 trillion, of which $1.185 trillion are home purchase loans and $458 billion are refinance loans.
OK fine, refinances can wait out the shutdown. It’s a huge inconvenience, and there are real costs at stake—borrowers will have to pay for rate lock extension fees (and won’t forget that at the voting booth).
But on the homebuyer side, there’s about 14,192 home purchase mortgages per day that need IRS transcript verification.*
That’s a sh!tload of loans, and that volume alone is enough to disrupt the housing market if this goes on too long. And actual total IRS volume is higher—about 80,000 per day— because of refis and many other reasons IRS transcripts must be verified.
The good news here is that last week, MBA chief Bob Broeksmit was able to break through to Treasury and help them understand how many homebuyers are actually impacted by this seemingly menial loan approval task. Because of this, IRS folks who process tax filing transcripts have been coming back to work.
So hopefully this loosens the monkey wrench and the gears speed up.
There are many other homebuying areas impacted by the shutdown, but this is perhaps the most pervasive across most loan types.
NAR link below has details on other impacted areas. And thanks to Bob and the MBA for understanding the consumer impact here.
*Here’s how I calculate that estimate: Divide MBA’s $1.185 trillion in purchase originations by 12 months: $98.75 billion in U.S. mortgages per month. Assume 10% down payment on NAR’s median existing home price of $257,700, so the average loan is $231,930. Divide $98.75 billion by $231,930, and you get 425,775 loans per month. Divide that by 30 days, and it’s 14,192 per day.