South Bend Home Loan

Thursday, March 27, 2014

How a Database You've Never Heard Of Can Kill Your Sale

It happened just last week.  A young Michiana man was in the process of buying a home through a different mortgage lender.  Closing was a week away when his mortgage originator called him to say that his loan was being denied because there was a hit on his CAIVRS.  Not knowing what the heck CAIVRS was, he called his Realtor.  The Realtor, also not knowing what the heck CAIVRS was, called me. 

This buyer and Realtor aren't alone.  Many, if not most, people in the real estate world don't know what CAIVRS is, yet it is something that can kill a sale without warning.  To help prevent that from happening to you, let me fill you in on just what this deadly little acronym is.

One Dangerous Database

CAIVRS stands for Credit Alert Interactive Voice Response System and it is a database maintained by the federal government that lists people who have defaulted on a debt owed to the Federal government or who have had a government insured/guaranteed mortgage foreclosed on within the last three years.  It also lists people who are currently delinquent on a debt owed to the Federal government.

Examples of Federal debts covered in this database include previous FHA or VA mortgages, Federal student loans and Small Business Administration loans.   For a borrower that had an FHA or VA mortgage foreclosed on, that borrower is not eligible to get another FHA mortgage until three years after the date that HUD paid the insurance claim to the lender. The buyer will show with an open 'hit' in the CAIVRS database until that 3 year window has passed.

The 'Paid Date' Problem

The thing that trips most people up with this is that CAIVRS uses a different date for when that three years begins.  Buyers, Realtors and even many lenders assume the magic three years starts with the date of the sheriff's sale.  For general loan approval guidelines, it does.  For CAIVRS findings, though, it does not.  The date used in CAIVRS is three years from when HUD pays the insurance claim.

These two dates are often far apart.  While a foreclosure is typically viewed as 'final' when the sheriff's deed is filed, HUD may not actually pay the claim for months or even years after that point. 

Case in point - I had a client recently who had a foreclosure in 2009 but continued to pay on the mortgage for two years afterwards even though he wasn't legally obligated (nice guy).  Sadly, HUD didn't pay the claim until he stopped paying on the loan so his three year waiting period to buy a new home turned into five years all because his name was still showing as active in this database. 

What To Do, What To Do

The question then comes up, what if a potential home buyer is showing up with a hit in that CAIVRS database?  If the information in CAIVRS about a borrower with an FHA loan is incorrect, it can be fixed.  FHA will correct the information if the person sends the appropriate documentation showing the correct information to the FHA Homeownership Center that covers their area.  They can locate the correct FHA Homeownership Center by going to the following website and clicking on the applicable state: HUD Home Ownership Centers. 

If, however, the information in CAIVRS is right and the claim was just paid later than expected for some allowable reason, there is nothing the buyer can do but wait.  Until the three years has passed and their name is no longer showing in that database, they are unfortunately not eligible for a new FHA mortgage.

What should a Realtor do?  Realtors often know when a home buyer has had a foreclosure because buyers often share this information.  If you know that your client had a previous FHA or VA foreclosure, ask the mortgage lender early on if they have run the client through CAIVRS yet.  Don't be surprised if they are confused.  This is often a back office step that the upfront person may not be aware of.  Some lenders hold this step until closer to closing and that is dangerous for your buyer.  Ask the lender to run CAIVRS right away to make sure there wasn't a delay on this HUD payment.

If possible, you'd be even better of getting them connected with a lender who is well aware of CAIVRS and will run their name through it before even giving you that pre-approval letter.  That's now my standard procedure with anyone having a foreclosure on their credit report.  I'd be happy to take that additional, important step for you and your buyer.

Lori Hiscock is a Sr. Loan Officer at Ruoff Home Mortgage‘s South Bend office.  One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University.  You can connect with Lori Hiscock or apply online here.

Monday, March 3, 2014

No Down Payment and A Check Back At Closing

Debi and David bought a home last month.  It was a perfect home for them - two bedrooms, two bathrooms, brick exterior, recently remodeled, the works.  Their Realtor was sharp too and managed to negotiate a $72,500 price for them even though things were selling for $75,000+ in the area.

Debi and David were thrilled.  How could they not be?  They got a home of their own, their mortgage payment was significantly less than their rent had been, and they got a check back at closing.

Wait a minute.....did I say that they got a check back at closing?

Yep, I did.  Debi and David used IHCDAs Next Home Down Payment Assistance program to cover their down payment and their sharp Realtor negotiated for the seller to pay the closing costs and prepaid items.  Between these two, all the costs were covered so Debi and David got their full earnest money check back when they closed on the purchase.

Does that sound like an attractive scenario for you or someone you know?  Then let me tell you more!  IHCDA's Next Home Down Payment Assistance is a great program and it's easy for buyers and Realtors to participate in.  Here are the plusses of it:
  • No Down Payment - IHCDA gives 3.5% of the price to the buyer.  This is a FHA loan with only 3.5% needed for the down payment so the whole thing is covered.  
  • Lower Credit Scores Allowed - buyers with credit scores as low as 660 are considered for approval.
  • Fast and Simple - the home buying process doesn't take any longer than normal and the home does not need to meet any higher standard.  The buyer does take an online homebuyer education class but that's about it.  Otherwise, it functions much like a regular FHA purchase.
Of course, there are always a few negatives:
  • Higher Interest Rate - the Next Home interest rate is typically a little higher than the regular FHA interest rate.
  • Higher Closing Costs - the closing costs are also higher so we normally have to ask for more in seller concessions to cover that.
  • Two Year Occupancy - the buyer does have to stay in the home for two years.  If they don't they have to pay some of the money back.  If they do, though, the money is theirs. 
Are those drawbacks something that a buyer should consider?   Certainly, but for most buyers who are having a hard time saving up a down payment, they are well worth it.  To learn more about how Next Home might work for you or for someone you know, give me a call or pop me an email (574-234-5201 or 

Lori Hiscock is a Sr. Loan Officer at Ruoff Home Mortgage‘s South Bend office.  One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University.  You can connect with Lori Hiscock or apply online here.