Government Shutdown Delaying, Cancelling Deals Involving IRS Liens
January 8, 2019
The continued government shutdown is disrupting closings and causing problems for title companies trying to obtain lien payoff information from the Internal Revenue Service (IRS).
While the government has said tax refunds will go out despite a continued shutdown, it’s been reported that only about 12 percent of IRS employees are still on the job. This is causing a backlog of calls to IRS offices as phone lines have been converted to voicemails. In addition, it appears the IRS shutdown plan limits the amount of time that collection staff spends on the phones or responding to correspondence.
Bill Burding NTP, executive vice president and general counsel for Orange Coast Title Co., described this as a “big problem” for the industry as deals are either being delayed or cancelled.
“There is no workaround in my mind, and I have said no to proposed ones,” he added.
Nick Hacker, president/ and CEO of North Dakota Guaranty & Title, said one underwriter his company works with has advised against closing deals involving IRS liens. The company is also holding some seller proceeds until the payoffs are confirmed in order to continue closing transactions.
In a bulletin released Monday to participants of its Income Verification Express Service, the IRS said it has started working through the backlog of requests for transcript information.
“While the IRS remains closed during the partial government shutdown, on January 7, 2019, it will begin processing requests for transcript information made through Income Verification Express Service (IVES) program,” the bulletin said. “Because it will take time to ramp this service up to normal operating status, it may initially take a few days to process these requests, as employees are brought back to work and begin to process requests backlogged since the funding lapse began on December 22, 2018.
Click here for information on which IRS collection advisory office to contact with questions about notices of federal tax liens or certificates.
Below is information on how the shutdown is affection other agencies or programs:
Fannie Mae and Freddie Mac have updated or clarified their loan purchase requirements due to the shutdown. Freddie Mac requires all borrowers to sign a 4506T request form prior to close, but the request does not have to be processed prior to close. Fannie Mae requires the same unless the borrower’s income can be verified though Fannie Mae’s proprietary Desktop Underwriter verification system in which case no 4506T is required.
According to HUD’s Contingency Plan, the FHA will endorse new loans in the Single Family Mortgage Loan Program except for Home Equity Conversion Mortgages. It will not make new commitments in the Multi-family Program during the shutdown. There may be delays with FHA processing due to short staffing.
Rural Housing Programs
The U.S. Department of Agriculture will not issue new rural housing direct loans or guaranteed loans. Scheduled closings of direct loans will not occur. Scheduled closings of guaranteed loans without the guarantee previously issued will be closed at the lender’s own risk.
After facing pressure from lawmakers and advocates, including ALTA, the Federal Emergency Management Agency (FEMA) on Dec. 28 resumed issuing new flood insurance policies during the government shutdown. The move helps ensure closings will not be delayed due to lack of flood insurance.