HUD CAIVRS Guidelines

HUD CAIVRS Guidelines on FHA Loans

Gustan Cho Associates are mortgage brokers licensed in 48 states

This article will cover HUD CAIVRS Guidelines on FHA loans when taking out a mortgage. Consider mortgage loans backed by the government, as they offer excellent value, especially if you are a borrower who has struggled to qualify for conventional loans. But there is a catch! You can only qualify for a government-backed mortgage if you have cleared the CAIVRS report. If you are wondering what this is, don’t worry! This article will delve a bit deeper to understand what this report is about, plus the guidelines on FHA mortgages. So, keep reading to learn more. 

What is CAIVRS?

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CAIVRS, or Credit Alert Verification Reporting System, was founded by the U.S. Department of Housing and Urban Development (HUD) in 1987. It is a government database that tracks and lists liens, judgments, defaults, foreclosures, and delinquent federal debts. If you are applying for an FHA, VA, or USDA, the lender will check your CAIVRS report, determining whether you qualify.

For better understanding, any borrower currently delinquent on federal debt is not required, or it is against the law for them to receive any federal loan that a federal agency backs. With that in mind, HUD uses the CAIVRS report to ensure that borrowers applying for a mortgage from a federal agency still need to get a defaulted loan from the federal government.

The non-credit-qualifying FHA streamline refinance are, however, exempted from this rule. This is because these refinances don’t require a credit check or verification of the borrower’s credit history, as they are based on their existing mortgage and ability to make on-time payments. The new credit information from the CAIVRS REPORT doesn’t matter. 

HUD CAIVRS Guidelines on FHA loans 

Now that you know what CAIVRS is, what does it say about FHA loans? Here are some guidelines on the database eligibility check: When a borrower applies for an FHA loan, the lender must check the CAIVRS database to verify their creditworthiness before getting approved.

As mentioned earlier, any previously defaulted federal debt can disqualify you from an FHA loan. So, the lender is just checking to ensure that there is none. Borrowers will not pass CAIVRS with defaulted government debts.  If you have defaulted on a government debt, which can include a student loan or a federal tax debt, it will also disqualify you from an FHA loan, according to CAIVRS.

Defaulting on government debt is often seen as a sign of financial irresponsibility, which can seriously dent your creditworthiness. Foreclosures can impact not passing CAIVRS.

HUD CAIVRS Guidelines on Foreclosure

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The CAIVRS also states that any foreclosure on an FHA loan is not eligible for a new FHA loan for a specified period. The specific period is, however, determined based on the severity of the default, including other factors such as why the borrower defaulted. For instance, a borrower who had a foreclosure due to an extenuating circumstance, such as a medical bill or a job loss, might be eligible for a new loan a lot sooner than one who had a foreclosure due to financial mismanagement. 

HUD CAIVRS Guidelines on Delinquent Federal Debt

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Delinquent federal debts – a borrower with delinquent federal debt, which can include past-due child support or a defaulted Small Business Administration (SBA) loan, will be ineligible for an FHA loan. Like defaulted loans, these delinquencies are often a sign of financial mismanagement, negatively impacting your creditworthiness or ability to manage debt. 

Loan disqualification – if you have a record in the CAIVRS database, then any FHA-approved lender may reject your mortgage application or request additional documentation or a higher down payment.

The mortgage lender might ask for an explanation as to why the borrower defaulted on the federal debt, and he may then consider this explanation when determining your eligibility. 

How Can You Tell If You Are on CAIVRS?

For starters, you are only on CAIVRS if you have defaulted on any federal debt. So, if you have, then you are on it. But because not all defaults or foreclosures make it into the database from the HUD system, the only way for you to know for sure will be to apply for a federal loan, as the lender and the federal agencies involved will then be able to access the system and will tell you whether or not you are in the database. Michelle McCue of Gustan Cho Associates answers the frequently asked question of what happens if your report isn’t clear.

There are some cases where you won’t get an A result code that designates whether you have a clear history. When you are in such a situation, you can still be approved for a loan, but you will have to prove, through relevant documentation, that you have taken steps to clear a federal debt that you have defaulted on.

Every FHA-approved lender has a different approval method or what you must do to get approved. For instance, if you had defaulted on a student loan, a lender may need to see that you have resumed making payments on time and have been for the past nine months or so. This way, you may convince the lender that you have taken significant steps to rectify the situation and may approve you for a loan. 

HUD CAIVRS Guidelines on FHA

How To Clear a CAIVRS Default

There are a couple of actions you can take to clear your CAIVRS report, and they are as follows; 

HUD CAIVRS Guidelines on Debt Rehabilitation

Per HUD CAIVRS Guidelines, the most straightforward way to clear your CAIVRS report is to clear the outstanding debt to the satisfaction of the agency that provided you with the loan. Dale Elenteny adds about lending requirements by lenders on HUD CAIVRS Guidelines:

Of course, the simplest way to ensure that you qualify for a loan will be to pay the debt in full, but as we had mentioned earlier, different lenders have different rules regarding the CAIVRS reports.

For some, you agreed to a payment schedule, and making several on-time payments might be enough to qualify you, while others might require you to clear the debt before they approve you. So, the best way would be to contact your FHA-approved lender to determine how you can proceed. 

HUD CAIVRS Guidelines on Errors

Contesting in case of inaccuracies – if you notice any inaccuracies on your CAIVRS report, federal law gives you the right to contest. If indeed it was an inaccuracy, of course, your report will be cleared. Get a direct consolidation loan if you have a student loan – the thing is, most student loans may be brought out of default if consolidated, which can be done in short order – in about six months. This entire process is free!

HUD CAIVERS Guidelines on Fixing Errors To Qualify For FHA Loans

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Suppose you consider applying for an FHA mortgage and believe you might be on the CAIVRS database. In that case, it will be a good idea to start working with an FHA lender to rectify the situation. For the most part, you need to take steps and pay off the delinquent debt or maybe set up a payment plan. Keep building a credit habit and clear up any negative marks on your credit history. Ultimately, do your due diligence to ensure you become a creditworthy borrower once again before you embark on the loan application process.  

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