CAIVRS is the Credit Alert Verification Reporting System, a federal database HUD created to flag people who owe the government money and have fallen behind. Lenders making FHA, VA and USDA loans check every borrower against it. A hit pauses the loan until the debt is resolved, and once it's resolved, the same buyer can close.
What puts a name in CAIVRS
HUD describes CAIVRS as a single home for delinquent federal debtor records from HUD, USDA, VA and the Small Business Administration, used by lenders approved by those agencies and by the Department of Education. In practice, the records that stop home loans most often are:
- A federal student loan in default
- A past FHA loan on which HUD paid an insurance claim
- A defaulted VA or USDA home loan
- A defaulted SBA business loan
Back taxes owed to the IRS are a different matter. They don't come through CAIVRS, and an IRS payment plan follows its own rules.
How each program handles a hit
FHA. HUD's handbook makes a borrower with verified delinquent federal debt ineligible until the debt is resolved with the agency owed, under the Debt Collection Improvement Act. A clear CAIVRS report is accepted as proof of that resolution.
VA and USDA. Lenders on both programs run the same check, and the delinquency has to be cleared with the agency before the loan can close. USDA accepts only a clear result.
Conventional. CAIVRS is a federal check, so it isn't run on Conventional loans. A defaulted debt still shows on your credit report and still affects your score and ratios.
Clearing a defaulted student loan
Federal Student Aid offers two main roads out of default.
Rehabilitation. You make nine on-time, voluntary payments within 10 consecutive months. The standard payment is 15% of your annual discretionary income divided by 12, and if that's too much, an income and expense form can set a lower amount. Once the ninth payment is made, the loan comes out of default and collections stop.
Consolidation. The defaulted loans are paid off with a new Direct Consolidation Loan, which then sits in good standing on a repayment plan.
For any other federal debt, paying in full or setting up a repayment plan the agency accepts is the usual route. Ask the agency for a letter once it's done.
A worked example after rehabilitation
Keisha has $32,000 in defaulted federal student loans. She starts rehabilitation and makes her ninth payment in the ninth month. Her loans move to a servicer, and she enrolls in an income-driven plan with an $85 documented payment.
On FHA, the lender counts the $85. Had her payment shown as $0, FHA would count 0.5% of the balance, or $160 ($32,000 × 0.5%). On her $4,800 monthly income, the $85 takes 1.8% of income ($85 ÷ $4,800), and the $160 would take 3.3%. With CAIVRS clear and the payment documented, Keisha qualifies under the same FHA limits as any other buyer, up to 56.9% total debt with an automated approval.
If you've been told a federal debt is holding up your loan, call AAA Capital Funding at 888-601-8344. We'll map out the rehabilitation timeline with you, and the student loan DTI calculator shows how your new payment will count once you're clear.