If you are reading this, you probably know a CAIVRS report impacts your FHA, VA or USDA mortgage approval. You are also probably in search of an exception to a CAIVRS hit. Congratulations, you have landed in the right place.
CAIVRS – What Exactly is it?
In short, a CAIVRS report alerts a mortgage lender that a borrower is delinquent or default on other government insured debt. For example, another Federal insured mortgage or student loan. Typically, a CAIVRS hit is final. It tells a mortgage lender the loan applicant is ineligible for an FHA, VA or USDA home loan. Eligibility is restored when the issue that triggered the CAIVRS hit gets resolved.
CAIVRS is a screening tool for the US Government. The report alerts creditors and tells them to halt on issuing new credit due to the borrower’s other defaulted Federal debt. Makes sense right? What about those with an ex spouse that ignored a federal debt that was once a joint debt during marriage?
Flexibility for CAIVRS and Divorcee’s
Commonly, the US government operates in a black and white manner. In fact, the Fed reminds me of Uncle Pauly in “Goodfellas”. As Ray Liotta explains what being business partners with Pauly means he says “no matter what happens … you pay me!”
However, when it comes to a CAIVRS hit there is a less mob like approach for those that have gone through divorce. After divorce, it’s common for one ex to miss payments on a debt that was once a joint debt during marriage. In addition, one ex could short sell or foreclose on a previously joint Federally insured mortgage. Previously joint debts remain on both ex’s credit long after divorce.
One Ex Causing CAIVRS Trouble for the Other Ex
A previously joint Federally insured debt awarded to one ex in divorce court still puts both ex’s at risk of a CAIVRS hit in the event of default. For example, if the ex deemed responsible for a previously joint federally insured debt defaults – a CAIVRS hit appears for BOTH ex’s.
You see, similar to a credit report, a CAIVRS report has no idea what debt the courts awarded to who. As a result, even though the court awarded the federally insured debt to one ex it can still come back to haunt both. Why? Unless refinanced post divorce, the defaulted federal debt remains on both ex’s credit report post divorce. In addition, both ex’s names remain on the NOTE for the debt.
Mortgage Exception to Divorce Related CAIVRS
In the case of a divorce, the ex applying for a new mortgage has an option. Lenders will make an exception and overlook the CAIVRS hit if 2 facts are documented. That means a loan applicant can close on a new FHA, VA or USDA loan even with a hit on their CAIVRS report. The borrower must prove and document 2 key facts:
- Divorce occurred before the debt started to default
- The debt was legally awarded to the ex not applying for a home loan
Who Makes the CAIVRS Divorce Exception?
Ultimately, FHA, VA and USDA leave the exception up to the lender originating the new home loan. Therefore, an almighty Underwriter makes the final decision. However, your loan officer will screen this for you during your pre-approval. If not, move to a lender that will. Rolling the dice with a CAIVRS and a home loan is not a good gamble.
By Jeremy House