Failing a CAIVRS check can get you declined for a mortgage even before you apply. Learn about this pre-screening tool and how it's used by government-approved lenders.
Unlike most conventional programs, government mortgage programs -- like the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA) and the United States Department of Agriculture (USDA) -- require anywhere from zero to 10% down, and don't always hold you to the same strict lending requirements as private lenders. In addition to regular loan requirements, you need to pass a review you've probably never heard of: CAIVRS.
What is CAIVRS?
Pronounced "cavers", CAIVRS stands for Credit Alert Interactive Voice Response System. It's a database that was created by HUD to track people who defaulted on federal obligations, have claims paid on direct or guaranteed federal loans, incur a federal lien or judgment, blow off a government-guaranteed loan or have a claim paid by a reporting agency.
CAIVRS contains delinquent borrower records from:
- the Department of Housing and Urban Development (HUD) (FHA Loans)
- the Department of Veterans Affairs (VA) (VA Loans)
- the Department of Education (DOE) (federal or federally-backed education loans)
- the Department of Agriculture (USDA) (USDA-backed mortgages)
- the Small Business Administration (SBA) (various SBA-backed business loans)
- the Department of Justice (DOJ) (federal judgements or settlements)
- the Federal Deposit Insurance Corporation (FDIC) (other federal obligations)
The Internal Revenue Service (IRS) does not report to CAIVRS.
CAIVRS Mortgage Screening
All federal agencies that extend or guarantee credit, including the FHA, VA and USDA, are legally required to pre-screen all applicants. If you apply for a USDA Rural Development Loan or an FHA mortgage and are not delinquent on federal debt or federal tax liens, then you have nothing to worry about. The check is just a formality and you'll be allowed to apply for your mortgage.
What if You Turn Up on CAIVRS?
However, if your name is listed on CAIVRS and you are delinquent on federal debt or have had a claim paid in the last three years on any government loan, you will not be eligible for financing. To apply for a government mortgage, you'll have to repay the debt in full or enroll into a repayment plan. If your plan is approved, you must furnish a written copy of the plan from the creditor agency. Federal IRS tax liens may remain unpaid as long as the IRS is willing to subordinate its debt to the new mortgage.
Exceptions to CAIVRS
Exceptions to this policy may be granted in the following situations:
- Assumptions: If you sold property with a government-guaranteed loan, with or without a release of liability, to a buyer who later defaulted and you can prove that the loan was not in default at the time of the sale, you are eligible for a mortgage.
- Divorce: You may retain your eligibility if the divorce decree or legal separation agreement awarded the property and responsibility for payment to your ex. However, if the mortgage was already in default at the time of your divorce, you are not eligible.
- Bankruptcy: When the property was included in a bankruptcy that you can prove was caused by circumstances beyond your control, such as the death of a principal wage earner, loss of employment due to factory closing, reductions-in-force, etc., or serious long-term illness, you may be eligible for government financing.
How Can You See if You're On CAIVRS?
You can't. CAIVRS allows only authorized employees of participating federal agencies to access its database for the purpose of pre-screening direct loan applicants for credit worthiness, and only permits approved private lenders to access the database for pre-screening applicants for federally-guaranteed loans.
If you think you might be on CAIVRS, your best bet is to have a HUD-approved mortgage lender check the database for you. Or you can ask the agency or creditor that you think might have reported you if you're in the CAIVRS system and what you have to do to get out.
What if You're on CAIVRS by Mistake?
Being on CAIVRS by mistake is not uncommon. Your lender can tell you what agency or creditor reported you in error, so you can contact the right people. All they have to do to get your name off CAIVRS is call the CAIVRS phone line and go through the telephone script for employees using CAIVRS.
The federal government is the toughest creditor you'll ever have. While it might fund your mortgage when no one else will, it will also go to great lengths to collect if you default and deny you federally-backed credit until you do.
This article was updated by Keith Gumbinger.
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