Government Shutdown and Housing: How will it impact home buyers and sellers?

As of the day of this writing, we are in day 7 of the government shutdown and neither side seems to be close to a compromise. How is this currently impacting the housing market?

The greatest item that I see potentially impacting the mortgage market is related to the IRS Form 4506-T. This is a required verification of the tax return numbers against the IRS database and is a fraud prevention requirement to make sure the tax return numbers are accurate vs. what the IRS has on file.

Currently this function is not being supported by the IRS due to the shutdown and there has been a great deal of speculation that this would delay or prevent loans from closing until this function is up and running again.

However, we have received word from two of our investors that we are being allowed to continue underwriting and closing our loans, and we can provide the 4506-T verification once the IRS is processing them again, and sell the loans to the investor at that time.

Basically, this means we are still doing business as usual!   However, our processors and underwriters will be carefully reviewing the tax returns, and if a potential error is discovered, it could trigger the need for the 4506-T to be completed prior to loan closing.

FHA and VA loans are very automated for the most part and our underwriters are approved to underwrite and approve these loans without the direct involvement of the agencies. We do not need FHA and VA to sign off on the loans we approve, so we are able to continue processing and closing most loans like normal. (FHA is not currently originating Reverse Mortgage HECM loans right now.)

We can get FHA case numbers without the involvement of FHA personnel in most cases.

We can obtain VA Certificates of Eligibility online without the involvement of VA personnel in most cases.

In the few cases that might require the involvement of FHA or VA personnel, they are still working with skeleton crews and taking care of business as they are able. Closings might be delayed for this reason but we would learn of this delay during loan processing and communicate it to the buyer, seller and agents involved.  Most loans can still be processed and closed without delay.

USDA Rural Housing loans are not being closed right now. A visit to USDA’s website offers the following message: “Due to the lapse in federal government funding, this website is not available. After funding has been restored, please allow some time for this website to become available again.”

Prior to the shutdown, Florida USDA Rural Housing was advising us of a 30-45 day backlog meaning that loans could easily take 60+ days from application to closing. When they start working again, look for this loan type to take even longer to close.

Fannie Mae and Freddie Mac are both open for business and we are processing, underwriting and closing conventional loans like usual.

Again, the largest potential risk of not being able to close mortgage loans was the inability to verify tax returns vs. the IRS database and our investors are allowing us to continue closing loans now, and verifying later prior to selling the loan to them.

One final impact of the shutdown is that interest rates are still very low. The Federal Reserve’s decision not to taper its QE3 Bond Purchasing last month helped to lower rates and the shutdown has also had the effect of lowering rates while investors flock to the safety of bonds.

In summary, government backed loans like FHA and VA continue to be approved and closed as usual.  Certain specialty loans including USDA Rural Housing Loans and FHA HECM Reverse Mortgage Loans are not being closed right now, but we can take applications and process files to be ready for approval and closing when the government re-opens.


We are doing business as usual and are still taking applications this week for loans to be targeted for closing in October.


Mike Tarleton
Sr. Mortgage Loan Officer
Bank of England

5410 E. Hwy 30-A, Suite 212
Santa Rosa Beach, FL 32413

850-866-2963 (Cell)
706-888-0980 (Cell / Text)
866-727-8521 (Fax)

NMLS: 264821

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Real Estate on The Rise…and Rising

 A local perspective on rising home prices and rising rates from Michael Tarleton, Sr. Mortgage Loan Officer with the Bank of England.

Average U.S. home prices gained 2.5 percent in the top 20 U.S. Markets from March to April 2013, according to the latest S&P/Case-Shiller Home Price Indices. From a year ago April 2012, home prices in these markets gained a whopping 12.1 percent.  “The recovery is definitely broad based,” according to David Blitzer of S&P Dow Jones in a release. “The two composites showed the largest year-over-year gains in seven years.”

The housing market has certainly seen its ups and downs over the past several years, but recent events have made things even more interesting than normal. Talk from Fed Chairman Ben Bernanke about possibly tapering its QE3 economic stimulus has resulted in mortgage rates climbing. In May 2013 the 30 year average mortgage rate per was 3.40%. This week it reached 4.51%.

What does this mean for home buyers and sellers?

Hopefully it means our economy is truly recovering and our financial markets will eventually return to a free market system that does not require government intervention. However, the reality is it is nothing but Fed “talk” that has caused this volatility in rates. And all the Fed has stated is that it “may” pull back its buying of mortgage backed securities later this year from $85B per month to $65B. That is still a huge amount of economic stimulus.

For the home buyer, if you are going to buy a house in the next 5 to 10 years, there is not a better time than now.

Even though rates may be higher than they were a month ago, they are still unbelievably low. The graph below from shows the national average mortgage rates from 1963 to 2012 and rates are still well below what was considered “normal” or “average” in years past.


The volatility in rates that has occurred is also an indicator of where rates are headed when the Fed finally ceases it quantitative easing. Sooner or later as the economy grows, the Fed will have to turn its attention to fighting inflation rather than keeping rates low and the way it fights inflation is by raising interest rates.

Why wait until then?

The Bank of England, has loan programs for all types of borrowers and we always go the extra mile for our clients. If you have any questions about the interest rates and how they affect your chances of owning real estate in our area, or  maybe you just a need a fast and free pre-qualification, please reach out.  You can email me at

Mike Tarleton
Sr. Mortgage Loan Officer
Bank of England

Mortgage Rates Hold Steady at 5.5%

Mortgage rates have managed to hold steady despite renewed optimism in the stock market spurred by better than expected corporate earnings reports and evidence the recession is nearing an end. The benchmark thirty-year, fixed-rate is right at 5.50% with no points and we are seeing more parity with other mortgage programs lately as both FHA and VA thirty-year rates are also at 5.50%. The rate on the fifteen-year, fixed-rate stands at 5.00%.

Mortgage rates have benefited from reassuring remarks from Fed Chairman Ben Bernanke who on Tuesday told lawmakers at his semi-annual address before congress that he plans to keep monetary policy “extremely accommodative” for some time meaning no rate increases are likely for the foreseeable future. I do not expect to see rates rise over the next week unless the stock market gets on an exceptional run of gain. Many analysts still feel the market exuberance seen of late is still premature as investors continue to cheer less than expected losses instead of actual increases in net profits.

We had some great news on the housing front last Friday as the government reported that initial construction of homes as well as new applications for building permits surged more than economists had expected. Housing starts rose to as seasonally adjusted annual rate of 562,000 in June, up 3.6% from May. The consensus estimate was for an annual rate of 524,000. Single-family housing starts were up a whopping 14.4%. Building permits rose 8.7% in June to an annually adjusted 563,000 while economists had expected only 530,000. This was the highest number of new permits since December and the second straight month of increases since the all-time low set in April. All this is just more evidence that the battered housing market has bottomed and finally on the upswing despite a continuing rise in unemployment.

Housing Market Bottoms Out

Mortgage rates eased slightly this week as the bond market was reassured by comments form Chinese officials who indicated they still had a taste for US Treasury debt and that the dollar would remain their primary foreign currency reserve. Thirty year mortgage rates settled to just below 5.50% to 5.375% as the yield on the ten year Treasury fell back to 3.5% after pushing 4% two weeks ago. Fifteen year mortgage rates were even more attractive with the no point coupon at 4.75%. With inflation in check and the stock market sputtering I don’t see any significant upward pressure on rates in the short-run. There will be several economic reports over the next week that could create some daily volatility as investors attempt to determine whether the economy is turning the corner or still stuck in a rut.

A report released on Tuesday showed that we may have finally reached the bottom of the housing market nationally. The S&P Case Shiller Index of home prices, though down 18.1% from the same month a year ago, showed only a .6% drop from March to April. This is nearly three quarters lower than the previous month’s decline of 2.2%. The Case Shiller index has shown a monthly decline for every month since July of 2006. Yale Economist and co-creator of the index, Robert Shiller, called it, ” a striking improvement in the rate of home price decline.” The good news was tempered, however, by another report that showed more prime mortgage loans became delinquent in the latest quarter and a report on consumer confidence showed a surprise dip. It will be interesting to see in this week’s report from the National Association of Realtors on pending home sales whether more evidence of a housing recovery can be seen.

Median Home Prices Down 16.8%

Mortgage rates have eased slightly after their steep run up over the past three weeks. Thirty year mortgage rates now stand at 5.625% after peaking at 5.75%. Rates could have been pressured above 6% had it not been for the stalled rally on Wall Street that has seen stock prices fall modestly over the past couple of weeks. Investors are beginning to question whether the economy will pull out of the recession as soon as once thought.

Continue reading “Median Home Prices Down 16.8%”

Home Affordability Index Up to 72.5%

Thirty year mortgage rates have been attempting to push through the 5% ceiling over the past few days as continued gains in the stock market have beaten up on bond prices. Jumbo rates remain frustratingly in the 6.875% range stifling any potential recovery in the high-end home sector. Government loan rates for thirty-year mortgages are now all in line with conventional rates hanging right around 5% for the past several weeks for VA, FHA and Rural Development. High-rise condo financing remains extremely difficult to obtain here in Florida though some local banks are offering in-house portfolio ARMs such as my 5/1 and 3/1 to try and help second-home buyers take advantage of the incredible deals out there right now.

We’ve had some more mixed news on the housing front as builder confidence sank to an eight-month low while the NAHB/Wells Fargo Housing Opportunity Index showed an increase in home affordability in the first quarter to 72.5% making it the best time in two decades to buy a home. Housing starts for April fell 12.8% but, upon closer inspection of the numbers, most of that decline was in apartment and condominium construction while single family home starts actually ticked up slightly for the month.

Fed cut Interest rates .5%

Last week in an emergency meeting The Fed cut the federal funds target rate .75% (the rate that private banks lend to other banks) and cut the discount rate .75% (the rate at which member banks can borrow short-term money from the Federal Reserve). Today, The Fed cut the Federal Funds Rate by another .5% in an effort to continue to ward off recession. The numbers are in for Q4 2007 with a very slow .6% growth rate, yes I meant 3/5ths of a point.

Here is the release by the Associated Press.

Continue reading “Fed cut Interest rates .5%”