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5 Things You Should Know About the Government Shutdown and Lending Practices

Government Shutdown October 2013

I know the current government shutdown has many of us weary of the current market. Judging by the questions I have received, many of us are under the impression that banks are unable to grant loans while the government is shutdown. I can assure you that is NOT true. Today I invited Teresa Hagood from Cadence Bank to clear up any misconceptions about the government shutdown. Teresa is a longtime preferred lender and has scores of satisfied clients.

My first question for Teresa was about the availability of government loans. Teresa answered, “On all conventional loans (FHA’s, VA’s), we are doing business as usual. We would just need a little extra paperwork including full tax returns and if you happen to be self-employed, personal and business tax returns for the last two years. We will continue to close those loans without any problems whatsoever. The only issue we would run into is a Rural Development loan, which is completely government controlled, so they would be closed until the government re-opens.” Teresa assured me that business is full steam ahead.

I also asked Teresa about employment verification if you are a government employee. “If they are a government employee,” Teresa replied, “The government uses a third party phone line to verify employment, so there will be no issue there. For the verbal employment verification, we would simply obtain that when the government reopens.”

The third question I had for Teresa was regarding tax verification in the loan process. “We are unable to do tax verifications, but that is why we are asking for full tax returns from the customer as a workaround. Once the government reopens, we will obtain the records post-closing so we have them on file. This will not stop their closing,” Teresa reassured.

My fourth question deals with the previous government shutdown, which lasted three weeks, and the current shutdown has only last a week thus far. This prompted me to ask Teresa what the lending practices would be if the government stayed on the same track. “We just received a memo today and what I explained previously will be the process until the government reopens.”

Lastly, I asked Teresa if there would be any delays in the lending process due to the government shutdown. “I read an article through Forbes that stated there would be delays in processing and underwriting, but it won’t delay our process any and the only closings it would delay would be the Rural Development loans. But other than that, we are completely able to close loans quickly.”

With much uncertainty about the shutdown, I was happy to have Teresa Hagood with me today so we could clear up any issues our customers would have on the government shutdown and the ability to be granted a loan. If you have any other questions, do not hesitate to contact us at or (256) 799-9000. You can also contact Teresa Hagood at or (256) 532-2660. Thanks and have a great day!

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