The federal government shutdown is stalling some mortgage applications in rural areas and small towns around St. Louis.
The U.S. Department of Agriculture’s Rural Housing Service effectively is closed, lenders say, halting applications for a program that requires no down payment on a home purchase.
“There’s no one home, and the lights are out,” said Doug Schukar, CEO at USA Mortgage in west St. Louis County. Even the agency’s website is down.
Such loans account for 12 to 13 percent of loans made by USA Mortgage, one of the largest home lenders in St. Louis area.
But other kinds of mortgages are being approved, despite the fact that the Internal Revenue Service is no longer providing borrowers’ tax information to lenders.
The latter problem last week threatened to stall applications for conventional mortgages. But most of the big banks that buy up such loans have waived or eased the requirement for IRS verification, St. Louis mortgage bankers say.
Regional mortgage lenders generally sell their loans to giant banks and to Fannie Mae and Freddie Mac, the big government-controlled mortgage companies. Fannie and Freddie are still functioning.
Cindy Moore, vice president at First State Community Bank in Farmington, said the purchasers of its mortgages are requiring borrowers to submit two years of tax records and W-2 forms in lieu of IRS verification.
Lenders also are working around problems in getting government verification of Social Security numbers.
Despite those glitches, lenders say the mortgage approval pipeline still is flowing, with the exception of USDA loans.
Lenders say they’re not encountering problems with the Federal Housing Administration, which guarantees loans with down payments as low as 3.5 percent. The FHA approval system is automated mostly, allowing the agency to get by on minimal staff during the shutdown, said Al Fuss, vice president at Gershman Mortgage in Clayton.
But borrowers hit a wall if they begin to apply for an FHA loan at one lender, then switch to another lender, said Russ Nolting, CEO at Keller Williams Realty in Kirkwood. Such mid-application switches are rare, he said.
To be safe, Nolting is advising all homebuyers to write contracts with 60-day closing times, which is longer than usual.
USDA-backed loans are offered in rural areas and small towns, including some on the outer reaches of the St. Louis area. The loans are available to people with income up to 115 percent of median income. Often they are used by first-time home buyers.
“In some markets, it’s really the go-to product for middle income buyers,” said Moore, whose bank serves a swath of outstate Missouri from the Bootheel to Columbia to Warrenton and Washington.