Shutdown Puts MN's Federal Home Loans in Limbo

Updated: 10/04/2013 6:21 AM By: Jay Kolls

Thousands of Minnesota homebuyers are feeling the pinch of the government shutdown.

Federal home loan programs are in limbo and, basically, are shutdown because the Internal Revenue Service (IRS) is closed and cannot verify income status which means any loan that gets processed is unable to close without the income verification. One federal loan program through the U.S. Department of Agriculture (USDA) is completely down and Dennis Thompson of Woodbury is now scrambling to close on his dream home.

Thompson, and his wife, built a new home in western Wisconsin under the USDA program and cannot lock into an interest rate, or close, on the house. Thompson tells 5 EYEWITNESS NEWS, "I am not sure what to do each day. I cannot close. I can't pay the builder and the builder can't pay his subcontractors and the mortgage company doesn't get paid. All this arguing in Washington, D.C. is seriously affecting the lives of hard working people all across the country and hurting the economy." Thompson says he is fortunate his builder has told him he will keep working on the home, but "I cannot expect him to do that forever, if this thing drags on."

There are two other types of federal home loan programs that face similar problems. The FHA and VA loan for veterans. Both of those loan programs cannot allow homebuyers to close because the IRS cannot verify incomes. If incomes of the homebuyers cannot be verified, insurance will not back the loans and closing is not possible.