With the government shutdown now in its third day and the debt ceiling deadline looming there are increasing signs that some financial players are growing less sanguine.  This morning, David H. Stevens, President and CEO of the Mortgage Bankers Association (MBA) released a statement saying the effect of the shutdown will grow larger the longer it continues.  A temporary shutdown will most affect federal employees, he said, "However the longer it goes, the greater impact it will have on borrowers, the housing market and the national economy."

Many of the items lenders need to process loans, tax transcripts, social security number verification, or FHA home loans will be delayed because of reduced functionality from HUD, IRS, and the Social Security Administration, he said.  "Different loan programs have different requirements, and these disruptions impact lenders in different ways, leading to confusion and fear among borrowers about whether they will be able to close on a home purchase or refinance."  Stevens noted there would also be significant impacts on multifamily lenders as well, especially rental housing properties awaiting FHA financing.

"The furloughs can disrupt time-sensitive mortgage transaction deals by interfering with borrower lock agreements and causing interest rate disparities from the time of closing to the time the loan is securitized.  For these reasons there must be a resolution so that borrowers and lenders are able to return to business as usual."