The U.S. government shutdown has turned Tim and Darcie Thornton's homebuying dream into a nightmare.
And there's no telling how it will end for the Thorntons, or for a portion of Clark County's housing market.
The Battle Ground couple's new, $227,000 Woodland home is nearing completion while their USDA-backed mortgage loan is stuck in limbo, a casualty of the government's Oct. 1 closure. Waiting for word on their financing has left the Thorntons and Darcie's teenaged son, Trevor, caught with half-packed bags and a storage unit full of belongings. The lease on their rental ends this month.
"We were planning to move by the end of the month," said Tim Thornton, who works as a caregiver to disabled adults.
The Thorntons aren't the only prospective homebuyers in the area who tried for a loan backed by the U.S. Department of Agriculture but who were stymied when legislators failed to agree on a government budget for the next fiscal year. In Clark County, about 15 percent of all homebuyers were using USDA lending before the shutdown because the zero-down USDA loans provided a low-cost mortgage for homes in rural areas, such as La Center, Ridgefield and Battle Ground.
"The mortgage insurance is also lower, which made the payments lower," said Lloyd White, a senior mortgage banker with Vancouver-based Summit Mortgage Corp.
He could not estimate the number of area homebuyers stuck in limbo over the USDA shutdown, which was already about to undergo changes due to prolonged haggling over the agency's long-delayed farm bill. Just before the shutdown, White said he and other area lenders had been told the new farm bill would eliminate Battle Ground from the USDA list of areas approved for loans.
"Then we received guidance that was no longer the case," White said. But now the government shutdown has now put a stop to all selling and processing of USDA loans.
"Nobody can get pre-approved for a USDA loan right now," White said.
Although White and other lenders have not been able to process the loans — which were accessible to families in higher income brackets, capping out at about $84,000 annually for a four-person household — they are still processing FHA loans, backed by the Federal Housing Administration. There's also been no problem with VA lending, backed by the Department of Veterans Affairs, said Kerry Greenwald, owner of Creekside Mortgage in Vancouver.
"We haven't even noticed the government is closed," said Greenwald, whose firm primarily deals with VA lending.
However, lenders say the shutdown could have broader and more negative impacts on the housing market. That's because certain government agencies, including the Internal Revenue Service, are no longer providing services crucial to the home-mortgage industry, including income verification.
"Some of the safeguards that have been put into the system are now more of a challenge to meet, given the government shutdown," said Susan Greenwald, single-family operations director for HomeStreet Bank, a community bank that operates two branches and a lending center in Vancouver.
Meanwhile, mortgage lenders can't even get the ball rolling on a USDA loan. The Web-based underwriting engine used by the agency has been shut down.
"USDA lending has come to a standstill at this time," Susan Greenwald said, adding that the shutdown poses the risk of a domino effect on home sales to move-up buyers.
"There are other related transactions that are contingent upon the one that is closing," she said.
It's a mess that has caused mortgage advisers to steer clients away from USDA lending, although most say there is little they can do to comfort clients who were in the midst of the process, like the Thorntons.
The rural lending program was never one of the quickest — even before the government shutdown — because USDA loans were bogged down by cumbersome approval requirements, said Chris Berg, a mortgage adviser with Pinnacle Mortgage Bankers in Vancouver.
Berg said the delay is indefinite now. Even if a resolution is reached, the backlog of unprocessed loans could take months to put through.
It's a discomfiting situation for the Thorntons, who spent two exhaustive years hunting for a home that fit the parameters of their tight budget, according to Robert Williams, their mortgage broker at Summit Mortgage Corp. The couple at first qualified for a government loan called A New Home for You. But the program was abruptly ended just after the Thorntons commissioned their builder, Karlsen Homes, to build their 1,500-square-foot house.
"So, we found out about the USDA loan and filled out all the paperwork," Darcie Thornton said. "But it takes 45 to 60 days and the government closed the next day."
Thornton, 42, a caseworker with the state Department of Social and Health Services, said she's still optimistic about the outcome.
The Thorntons received word from their builder on Monday that the family can temporarily rent their new home, which came as a relief. Still, they're worried about their loan and now face additional expenses, Tim Thornton said.
The couple had expected to close escrow on their $227,000 house by the end of next week at an interest rate that was locked in at 4.25 percent. But the lock was only for 45 days.
Tim Thornton, 50, called the entire episode frustrating.
"Until the federal government opens, we just don't know what's going to happen," Thornton said. He hadn't known the federal USDA loan program could evaporate with the government shutdown, which he called a "battle of wills" between elected officials.
"They don't take into consideration, or care how it affects you and me," Thornton said. "We're just an inconsequential part of it."