Gone Fishin’

By on 1 October, 2013 in Legal Issues, Real Estate, Sandra Nickel with 3 Comments

So a lot of federal employees are out of work as of today.

“I’m not headed to a National Park,” you may say, “so it matters not to me.” Or perhaps your response is that you think a lot fewer federal worker bees is really a good idea. Chances are, you see little (if any) connection between the Washington shutdown and Midtown Montgomery.

Unlike during previous Washington-is-out-of-business events, today the FHA will continue to issue new mortgage case numbers, which are required to get you a new or refinanced FHA loan with that tiny little 3.5% down payment requirement. And if you’re lucky enough to be eligible for a VA loan, that process will continue to run as well. So all’s well, right?

Not so fast.

Did you know that every lender making mortgage loans today is required on every loan they originate to request directly from the IRS a transcript of the tax return for every borrower on the loan? You see, mortgage lenders are not allowed to take our word for anything.

Just because you take them a copy of your tax return — duly filed on time — does not mean that they are allowed to trust that copy. In a word, today’s mortgage lender has to double-check and verify everything we tell them. They have to act as if someone might be sneaky enough to turn in a false set of numbers regarding, for example, their income. Imagine that. It’s as if some folks really used fraudulent information to obtain mortgages recently and then those loans went bad and the houses ended up in foreclosure. Amazing.

And while the FHA and VA are still in business (although perhaps more slowly than normal because their staffs will be at “skeleton level”), the IRS has made known they have a CLOSED—GONE FISHING notice on their door where tax transcripts are concerned.

So if you (or your friend-neighbor-relative in Midtown Montgomery) are at the front end of a real estate purchase or sale that involves a new mortgage, you’re being impacted tremendously because that loan simply cannot be made until the folks in Washington declare a truce and put the country back in business again. Your dream, in other words, has been ambushed by the politicos.

Lest you misunderstand, this is a Midtown Montgomery problem. It’s also a nationwide problem. Every residential real estate market in the United States stands to be negatively impacted. And this just as the housing market was showing real signs of life.

We need to teach our elected representatives about the law of unintended consequences!

Sandra Nickel has been listing and selling residential real estate for over 30 years, most with an intense focus on Montgomery’s Midtown neighborhoods. Sandra serves on the Mid-Alabama Coalition for the Homeless, the Cloverdale Business Coalition, Historic Southview, the Volunteer and Information Center, Landmarks Foundation and her own neighborhood Garden District Preservation Association.

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There Are 3 Brilliant Comments

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  1. Shane says:

    Just a note: I think they’re requesting tax paperwork from the IRS, and not the IRA. 😉 Might feel like the IRA at times, though. Ha! 🙂

  2. admin says:

    Good point, Shane! We made the change.

  3. MS says:

    Interesting perspective. I think this government shutdown is going to continue to have hidden impacts like this until they agree to something. I’m so tired of hearing about continuing resolutions, budgets, and Obamacare. Just run the stinkin’ country so the rest of us can live our lives…and get our mortgages.

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