Are VA Loans Affected by the Government Shutdown?
With the government shutdown in place since December 22nd, there was initially a lot of speculation and worry about how VA loans might be affected.
Now that we're in the fifth week of the shutdown, with no foreseeable end date, it's clear that VA loans are still going strong.
The VA Continues Processing Loans During the Shutdown
Prior to the shutdown, Robert Wilkie, the Secretary of Veterans Affairs, issued a statement where he explained that the VA was already fully funded for the 2019 fiscal year, which allows "all VA operations [to] continue unimpeded."
The VA is able to make this promise for a few reasons. One is the fact that they are partially staffed during government shutdowns, including the employees who process guarantees and endorsements for VA loans. Because these employees are paid through borrowing fees and not the government directly, they are fairly immune to government shutdowns.
In addition, the VA's ability to process VA home loans is considered an essential service. It is even included in VA's Veterans Field Guide to Government Shutdown under the list of services that will not be impacted, even if there were to be a lapse in appropriations.
Because the VA is open and processing loans during the shutdown, we, as a lender, are able to access your Certificate of Eligibility, order a VA appraisal, submit your funding fee, and complete other essential portions of the VA loan process that rely on cooperation with the Department of Veterans Affairs.
VA Loans Aren't Funded by the Government
As alluded to in our prior paragraph, another reason why VA loans have been able to continue without interruption during the government shutdown is the fact that the majority of work is done by private lenders, not government workers.
At Low VA Rates, we employee teams of people at nearly every step of the process. In addition to our loan officers, processors, and funders, we also have in-house underwriters that can continue working on your loan, even it happens to require manual underwriting.
Solutions for Holdups with Other Government Agencies
Though we do as much in-house we can, some parts of the the VA loan process occasionally depend on outside government agencies, beyond even the VA.
Some examples of situations that require information from other, currently shutdown government agencies include income verifications from the IRS if you're self-employed, verification of your Social Security number (SSN) from the SSA, and employment verification for veterans who work for the government.
While these issues will only affect a small portion of VA loan borrowers, at Low VA Rates, we haven't had any issues being able to verify employment for government employees, SSNs, or income, so there is no need to be concerned about shutdown-related delays to your application.
Homeowners with VA Loans May Be Affected
While VA loans themselves, and the ability to get a VA loan, aren't affected by the shutdown, homeowners who already have a VA loan could be.
Members of the Coast Guard
Like the Department of Veterans Affairs, the Department of Defense (DoD) had already been funded prior to the government shutdown. However, the Department of Homeland Security (DHS) was not yet funded for 2019 when the shutdown occurred.
This distinction matters because the Army, Navy, Marines, and Air Force all receive their funding under the DoD umbrella, so servicemembers in these branches are getting paid during the shutdown. However, members of the Coast Guard are funded through DHS.
When the shutdown started, the Coast Guard announced that their servicemembers wouldn't be receiving their paychecks. Then, on Dec. 28th, it was announced that they would receive their final 2018 paycheck, with no guarantee of future ones during the remainder of the shutdown.
In mid-January, members of the Coast Guard did not receive their first paycheck, and won't see any for the foreseeable future while the shutdown continues. Without this income, Coast Guardsmen who are homeowners may have difficulty making their monthly mortgage payments.
Veterans Working for Government Agencies
After leaving the service, many veterans find work with the federal government. If they work for an agency affected by the shutdown, they may be required to work without pay or they may be furloughed, which means they are temporarily unable to work at all.
Like with our Coast Guardsmen, this means that they might have a hard time making timely payments on their VA home loans during the shutdown.
What to Do If You're Unable to Pay Your VA Loan
The VA has recommended that lenders consider being more lenient with borrowers affected by the shutdown. Some specific measures they recommended include waiving late fees, delaying reports of late payments to the credit bureaus, and even forgiving late payments.
At Low VA Rates, we take these recommendations to heart. During this time, it is our internal policy to waive any applicable fees for those affected by the shutdown.
In addition, because we aren't an actual loan servicer, we don't ever report to credit rating agencies, whether we're experiencing a government shutdown or not.
Finally, if you are affected by the government shutdown to the point that you're worried you won't be able to make your monthly mortgage payments, you have options. Even if we aren't your lender, Low VA Rates can help you!
Depending on your situation, there are a couple of different ways we might be able to help you. One option would be to do a streamline refinance and get you in to a more affordable loan with a lower payment.
If we are your lender, you may have a few other options, as well.
If you contact us, we might be able to grant a temporary reprieve where you have two or three months that you don't have to make your payment. Once the shutdown ends and you receive your back pay, we can then work together to come up with a payment plan to get you caught back up.
A modification of your loan agreement could be another option, where your actual loan agreement is adjusted and changed to accommodate your situation.
No matter what workout option we go with, it is possible to reduce the stress of not receiving your income because of the shutdown. Just remember, it's better to do it sooner, before you even miss any payments. So, if you think there is even a possibility you'll need help, reach out now!
Why You Should Get a VA Loan During the Shutdown
As we've already discussed, VA loans haven't really been impacted by the current government shutdown. If you've been worried about starting or continuing a VA loan, you can stop stressing. In fact, now might actually be the best time to get a VA home loan.
According to a recent article published by NerdWallet, mortgage rates recently dropped in December, but should only last for a short while. Because you can still get funding for a VA loan, you might want to consider taking quick action and locking down a low rate before they start rising again through the rest of 2019 and into 2020.
If you're already in the process of a VA loan, keep moving forward! Again, we haven't experienced any delays, and you could also take advantage of the current lower rates. Even if the government shutdown continues for awhile, we'll still be able to process and close your VA loan.
Though they're unlikely, if we do experience any delays with your application, we'll keep you informed. At Low VA Rates, we believe in communication and transparency. It's why thousands of veterans and servicemembers have trusted us for their VA loans, and you can too.