Understanding the FHA CAIVRS Report

Government-backed mortgages can provide excellent value, especially for those who struggle to qualify for conventional loans. But there’s a catch: You can’t qualify without a clear CAIVRS report. Short for Credit Alert Verification Reporting System, CAIVRS is a government database that lists delinquent federal debts that could impact your loan approval.

What is CAIVRS?

The CAIVRS database (pronounced “KAY-vers”) — developed by the U.S. Department of Housing and Urban Development (HUD) in 1987 — tracks liens, judgments, defaults, foreclosures and delinquent federal debt.

If you’re applying for a loan backed by the Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA) or U.S. Department of Agriculture (USDA), your loan officer will pull your CAIVRS report as part of the qualification process. One notable exception to this practice is a non-credit-qualifying FHA streamline refinance, which doesn’t require a CAIVRS report.

It’s against federal law for people who are currently delinquent on federal debt to receive federal loans or loans backed by a federal agency. For this reason and to reduce lending risks by choosing creditworthy borrowers, HUD uses CAIVRS to ensure that anyone applying for credit from a federal agency doesn’t have a history of defaulting on government loans.

In short, the CAIVRS database serves three main purposes:

• It checks that people applying for federal loan programs don’t have outstanding debt or delinquencies on other federal loans.
• It helps private lenders that issue government-backed loans avoid lending to people who are considered credit risks.
• It shows the public that the federal government is taking steps to collect unpaid debt.

What information shows up in a CAIVRS report?

When your Social Security number is entered in the CAIVRS system, it generates a result code ranging from A through J. Only code A indicates people with no “hits” (claims, defaults, foreclosures or judgments) on their record.

Here’s the full list of result codes:

There are six types of defaulted federal debt that may result in a “hit” on a CAIVRS report:

• FHA loans: HUD reports any current FHA loan delinquencies and defaults, as well as mortgage insurance claims paid by HUD for homes foreclosed upon within the past three years. Homes in the early stages of foreclosure will be reported; however, if the homeowner brings the loan current, the hit will be removed from the report.
• VA loans: Military homeowners who default on their VA loans are reported to CAIVRS. The VA also reports information on mortgage insurance claims paid due to foreclosure as well as defaults related to overpayments of education loans or disability benefits.
• USDA loans: Rural homeowners with delinquencies over 90 days past due, defaults or insurance claims due to foreclosure on federally guaranteed USDA loans are reported to CAIVRS.
• Federal student loans: Delinquent or defaulted student loans and claims paid for federally backed education loans will show up on a CAIVRS report.
• Small business loans: A default on a Small Business Administration (SBA) loan, where your business tax identification number (TIN) was used, might not be reported on your personal credit report. However, it will still appear on your CAIVRS report.
• Department of Justice judgments or settlements: CAIVRS collects data on debts under the department’s purview. These debts involve unsatisfied judgments, which are court orders to pay debts. Common judgments are related to unpaid child support, federally guaranteed education loans or certain FHA-insured loans issued to investors.

Does CAIVRS include IRS liens?

Delinquent taxes and liens aren’t reported to CAIVRS. They are handled separately by the Internal Revenue Service (IRS) and appear in the public records section of your credit reports.

What happens if your CAIVRS report isn’t clear?

Here are a few things that might happen if your CAIVRS report isn’t clear:

1. Your loan application may be denied

Each government agency has different rules for loan approvals, but you likely won’t be able to get a government-backed mortgage if your CAIVRS report isn’t clear. Additionally, you can’t sidestep this requirement by getting a cosigner or co-borrower because, typically, every person on the loan has to pass a CAIVRS check.

2. Your loan application may be accepted with additional documentation

In some cases, if you do not receive an A result code (which would designate that you have a clear history with federal credit), you can still be approved if you provide documentation showing you have taken steps to resolve the outstanding debt. Again, each agency has its own rules about what you need to do to address your outstanding debt. For example, resuming payments on student loan debt wouldn’t be enough to clear your CAIVRS report. You would also need to get out of default and then make nine on-time payments within 10 months.

Qualifying for a mortgage with a student loan default

There’s an important link between student loan debt and mortgage approval: your debt-to-income ratio (DTI). If the debt you defaulted on was student loan debt — even if it wasn’t federal student loan debt — it could affect your DTI and make it more difficult to meet conventional loan requirements.

3. You may qualify for a CAIVRS exception

In a few special cases, you may still get an FHA-insured mortgage even with hits on your CAIVRS report:

• Your FHA loan was assumed. If someone bought your home, took over your FHA loan through an assumption and later defaulted, you may still be eligible for a new FHA mortgage.
• Your bankruptcy was due to circumstances beyond your control. You may be eligible if your federal debts were written off through bankruptcy because the primary wage earner died or became ill.
• You got a divorce. If your ex-spouse was responsible for a mortgage and this was recorded in your divorce decree or legal separation agreement, lenders may not count the debt against you as long as it happened after the agreement was enacted.
• You were a disaster victim. You might be exempt from CAIVRs reporting if you couldn’t pay your mortgage because you were involved in a presidentially declared disaster, so long as you were current on your mortgage before this incident.
• You’re selling your home. The CAIVRS report may create challenges if you’re selling a home to a buyer using FHA, VA or USDA financing. An exception may be made if the home is your primary residence.

If you can’t clear your CAIVRS report, don’t panic — you can pursue mortgage loans that don’t require a CAIVRS report. Conventional loans aren’t backed by the government — which means they don’t use CAIVRS — and you can choose from several types of conventional loans.

How long do defaults and delinquencies stay on CAIVRS?

Mandatory waiting periods limit how soon you can qualify for a mortgage after a default or other problem, but they aren’t universal. Each agency sets its own rules on how long it will continue reporting your default, and other agencies are not required to disqualify you simply based on the presence of a hit on your CAIVRS report. To determine whether you qualify, each agency will apply its own rules.

When the agency backing the loan or program you’re applying to is the same agency that reported a hit on your CAIVRS report, the situation is slightly more complex. In these cases, there may be special considerations and requirements. For example, with a USDA loan, you may have to write a letter and provide supporting documentation to explain why you were unable to make your payments and why you’re unlikely to experience the same type of hardship again.

How to find out if you are on CAIVRS

Even if you’re aware that you have a default in your past, you may still wonder if a record of that debt made it into the CAIVRS database. It’s not just wishful thinking — one audit found that records of 260,000 borrowers’ defaults, foreclosures and claims hadn’t made it from HUD’s system to CAIVRS. Unfortunately, the only way to know if you’re listed in the CAIVRS database is to apply for a federal loan, as only participating federal agencies and approved lenders can access the system.

How to clear a CAIVRS default

There are a few actions you can take to clear your CAIVRS report:

• Rehabilitate your debt. To clear your CAIVRS report, you typically need to settle the outstanding debt to the satisfaction of the government agency that provided or backed your defaulted loan. Of course, the simplest way to resolve the situation is to pay the debt in full. Barring that, there are no universal rules; for some loans, agreeing to a repayment schedule and making a certain number of on-time payments will be enough, while for others, it won’t be. Therefore, you should contact your lender to determine how to proceed.
• Dispute inaccuracies. Federal law gives you the right to contest any information in your CAIVRS report that might lead to losing eligibility for federal loans. You’ll be notified in writing whenever CAIVRS turns up results tied to you and will be given 30 days to contest the information formally.
• For student loan debt, get a direct consolidation loan. Most federal student loans can be brought out of default if they are consolidated. This can be done quickly — usually in less than six months — and the process is free.