Understanding the FHA CAIVRS Report

Mortgages backed by a government agency 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 debt that could affect your loan approval.

What is CAIVRS?

Founded by the U.S. Department of Housing and Urban Development (HUD) in 1987, today the CAIVRS database (pronounced “KAY-vers”) 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) you should expect your loan officer to pull your CAIVRS report as part of the qualification process. One notable exception to this rule is a non credit-qualifying FHA streamline refinance, which doesn’t require a CAIVRS report.

It’s actually 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, as well as to reduce the risk of lending by choosing creditworthy borrowers, HUD uses CAIVRS to make sure that anyone applying for credit from a federal agency doesn’t already have a track record of defaulting on loans from the government.

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 extending credit to people 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, the CAIVRS system will return a result code ranging from A through J. Only “A” designates someone who has no “hits” (claims, defaults, foreclosures or judgments) on their record.

Here is the full list of result codes:

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

1. FHA loans. HUD reports any current FHA loan delinquencies and defaults, as well as mortgage insurance claims paid by HUD for homes foreclosed upon in the last three years. Homes in the early stages of foreclosure will be reported — however, if the homeowner is able to bring the loan current it will drop off the report.
2. VA loans. Military homeowners that default on their VA loans are reported to CAIVRS. The VA also reports information on mortgage insurance claims paid because of foreclosure as well as defaults relating to the overpayment of education loans or disability benefits payments.
3. 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.
4. Federal student loans. Delinquent or defaulted student loans and claims paid for federally backed education loans will show up in a CAIVRS report.
5. Small business loans. A default on a Small Business Administration (SBA) loan might escape reporting on your personal credit report if it was taken out using your business tax identification number (TIN) instead of your Social Security number. However, it will still show up in your CAIVRS report.
6. Department of Justice judgments or settlements. CAIVRS collects data on debts under the purview of the DOJ. These debtors have 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.

Delinquent taxes and liens aren’t reported to CAIVRS

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

What happens if your CAIVRS report isn’t clear?

Each government agency has different rules around loan approval, but you likely won’t be able to get a government-backed mortgage if your CAIVRS report isn’t clear. In addition, 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.

However, in some cases, if you do not receive an A result code designating that you have a clear history with federal credit, you can still be approved as long as you provide documentation that you have taken steps to resolve the outstanding debt. Again, each agency has its own rules about exactly what you have 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 on-time payments for nine months.

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

How student loan debt and mortgage approval are related

There’s an important link between student loan debt and mortgage approval. If the debt you defaulted on was student loan debt, it could affect your debt-to-income ratio (DTI) and make it more difficult to meet conventional loan requirements.

Finally, there are a few special cases in which 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 with 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 a bankruptcy because the primary wage earner died or became ill.

You got a divorce.If your ex-spouse was responsible for a mortgage and that fact 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.

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.

The table below summarizes how long you can expect a hit on your CAIVRS report to make a significant difference when applying to borrow through a federal agency or federally-insured loan:

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

You should know whether you’ve defaulted on any of your federal debts in the past, but you may still be wondering if a record of that debt made it into CAIVRS. 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 into the CAIVRS database. Unfortunately, the only way you’ll know if you’re listed on 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.Generally, to clear your CAIVRS report, you’ll 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 will be to pay off the debt in full. Barring that, there are no rules that apply across the board; 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 or associated agency to determine how to proceed.

Dispute inaccuracies.Federal law gives you a right to contest any information contained in your CAIVRS report that might lead you to lose eligibility for federal loans. You’ll be notified in writing whenever CAIVRS turns up results tied to you and given 30 days to formally contest the information.

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 in short order — usually less than six months — and the process is free.