Six Degrees of Shutdown: Real Estate

by Alex Stenback on July 6, 2005

Ripple_1Blogger and WCCO reporter Jason DeRusha emailed us yesterday regarding one of the unintended consequences of the government shutdown he’d heard about – that government employees idled during the shutdown were being denied home loans because they are off the job.

"I’m working on a story on state employees who can’t close on new homes– a legislator told me a realtor called her furious… because the shutdown put this employee into the "unemployed" category and therefore unable to close….have you heard of anything like this?"

This is absolutely true. By the hypertechnical standards that are underwriting guidelines – a state worker who is not receiving a paycheck is considered unemployed until they are back on the job.  That means that until the shutdown ends, these loans are not eligible for funding.  Of course, any time a loan is denied unexpectedly, there is a cascading effect that reaches far beyond a single transaction.  Because most sellers are depending on the proceeds of their sale for the next purchase, (and likewise for that seller, and so on down the line) It can be a real mess when even one transaction falls through. See Jason’s story on this ‘ripple effect’ below:
ยท The Ripple Effects of the Shutdown [wcco.com]

{ 4 comments… read them below or add one }

duane July 6, 2005 at 5:17 pm

One good thing about this shutdown… no more new realtors! If anyone wants to apply for a license right now, they can’t!

Editor July 6, 2005 at 5:37 pm

We can hear the high-pitched whining from here. To deny all these soon-to-be millionaires their ticket to fortune is a true crime, I tell you.

Alexis July 7, 2005 at 12:19 am

Wow, that’s f**ked.

Paul July 7, 2005 at 9:19 am

This applies to quite a few areas – including new car clamping entities…

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