Title Tip: How Will The Federal Government Shutdown Affect Your Closing?

By Lydia Blair
Special Contributor

In case you’ve been out of touch lately, we’re experiencing a federal government shutdown.

The U.S. government doesn’t shut down too often. But when it does, there is a ripple effect. Some areas feel the effects more than others. We shouldn’t feel it too much in the title business unless it continues. The longer the shutdown lasts, the more likely it is we will feel a negative impact on DFW real estate market.

Typically, a shutdown includes all non-essential government employees. Some of the non-essential folks work in jobs related to the mortgage and financing process. This shutdown has sent home 95 percent of workers at the Dept. of Housing and Urban Development (HUD). Additionally, some of the IRS and Social Security Administration jobs are involved.

This may concern anyone applying for a home loan. Mortgage companies confirm all application information prior to approving a loan. The borrower’s income is verified with the IRS and their identity with the Social Security Administration. With a government shutdown, the employees that work in those departments are either furloughed or operating at minimal capacity. Some information can still be accessed, but may be delayed.

Buyers could be looking at delays in getting loan approval, which would result in a closing delay. Sellers should be prepared to make adjustments to allow for these potential delays.

Fortunately, a brief federal government shutdown has very little impact when it comes to title searches and closings. Most of the government entities we deal with are on the state and local level, not the feds. Title searches for records, liens, judgements, etc. are still accessible to the title plants.

When it comes to closing sales, it is business as usual – if the existing liens on the property are usual. Deeds can still be filed with the county court records. Local taxes statements can still be confirmed. The offices of surveyors, HOA management companies, appraisers, etc. are unaffected.

Where we might find difficulty would be in securing payoff amounts for some liens, like IRS debts and HUD loans. If there are liens on a property, the title company will not provide clear title, insure the title and close the transaction without being able to confirm the payoff of those existing liens.

The payoff amount of an IRS lien must come from the IRS. And the payoff for a HUD lien must come from HUD. With those departments shutdown, a closing delay may result if the seller has a lien involving HUD, the IRS or any other federal government entity. There is nothing we can do about it until those government departments are back in business.

Experts say that a shutdown of more than two weeks will negatively affect economic growth throughout the country. That would cause a different kind of ripple through the real estate industry. For now, we’re not feeling much upset in DFW from the shutdown.

The opinions expressed are of the individual author for informational purposes only and not for the purpose of providing legal advice. Contact an attorney to obtain advice for any particular issue or problem.

Lydia Blair (formerly Lydia Player) was a successful Realtor for 10 years before jumping to the title side of the business in 2015. Prior to selling real estate, she bought, remodeled and sold homes (before house flipping was an expression). She’s been through the real estate closing process countless times as either a buyer, a seller, a Realtor, and an Escrow Officer. As an Escrow Officer for Carlisle Title, she likes solving problems and cutting through red tape. The most fun part of her job is handing people keys or a check.