Lou Weaver was one day away from closing on buying a new home in south Palm Springs, until the partial government shutdown shuttered the federal agency he needed to sign off the sale.
As long as the Bureau of Indian Affairs remains closed during the partial government shutdown, Weaver can’t get furloughed federal employees to approve his purchase — a must for all Indian lease land and usually the last box to check off for a property in escrow.
The shutdown this week threw buyers and sellers of Indian lease land into a limbo across the Coachella Valley, leaving hundreds of thousands of dollars hanging on pending property transactions.
“It’s very much affecting me,” Weaver said. “It’s quite a complicated procedure. I had most of the signatures [from the Bureau of Indian Affairs], all but one on Sept. 30.”
About half of Palm Springs lies on Indian lease land. Homeowners and commercial businesses, with the approval of the Bureau of Indian Affairs, can lease the buildings on that land for a period of time.
Currently there are 123 active listings on lease land in the city, with 38 sales pending, according to real estate data from the Palm Springs Regional Association of Realtors. Sales in active escrow are now frozen.
If the standstill continues over the next month – the last federal government shutdown dragged on for three weeks in 1995-96 – some mortgage loans locked at a fixed interest rate could expire, forcing buyers to reapply for a potentially higher rate and resubmit financial records.
The Bureau of Indian Affairs office off North Gene Autry Trail stayed open late Monday and for part of Tuesday morning to process property transfers and deed trusts, real estate experts said. The bureau won’t issue any more land titles and records or approve new documents until Congress reaches an agreement on the national budget, according to a memo the bureau circulated Tuesday.
Sandy Edelstein, a senior loan officer for Prospect Mortgage who frequently handles Indian lease land loans, said the bureau approved several of his clients’ loans last-minute before the shutdown. Edelstein typically closes between five and seven loans on Indian lease land every month in Palm Springs. Four loans will probably be delayed this month, he said.
“It’s frustrating for everybody,” Edelstein said. “People’s rate locks can potentially expire.”
A loan interest rate stays locked from a week to a couple weeks, depending on the mortgage lender. Edelstein drew loan documents for clients in September, papers that expire Oct. 10. After that date, clients will have to submit documents again and sign a new loan. An extension usually requires a fee based on a percentage of the property sale, but he’ll try to reduce or waive the fee for his clients, Edelstein said.
“This is truly one of those things that was unforeseen and out of anybody’s control,” Edelstein said.
Julie Ekstrom, an escrow officer for CV Escrow, said she’s been bombarded by emails from her clients wondering about the shutdown. About a third of her clients are in escrow for properties on Indian lease land in Palm Springs, she said.
“I think given the big picture, they’re understanding,” Ekstrom said. “But I can’t say that they’re happy. A lot of people who are frustrated, those who are getting loans on those properties, they stand to lose their interest rates.”
Buyers can’t move in and sellers can’t close, said Maryellen Hill, a real estate agent who runs her own firm, Maryellen Hill & Associates. Hill said she has two clients in escrow. One was supposed to close Monday; the other, in late October.
“All we do is just wait to hear what happens on the news that we don’t have a shutdown of the government anymore,” Hill said.
The shutdown also affected pockets of Indian lease land elsewhere in the Valley.
Ed Park, one of Edelstein’s clients, said he was supposed to close Friday on a $389,000 home in the Mission Hills Country Club of Rancho Mirage. Park had been wanting to move from his condo into a larger place.
Now, Park can only wait. If the shutdown continues, he risks losing his loan, or pay a $1,500 extension fee that he hopes can be waived. Drawing financial documents for his initial loan, including credit card history and bank statements, was a lengthy process lasting two to three weeks.
“We’re in limbo now,” Park said. “We don’t have any idea when this is going to end.”
Business reporter Dominique Fong can be reached at (760) 778-4661, firstname.lastname@example.org and on Twitter @dominiquefong.