HUD'S Credit Alert Interactive Voice Response System (CAVERS)

HUD'S Credit Alert Interactive Voice Response System (CAVERS). You might have heard of the term CAVERS in the past, but not really understand what it is or even what it stands for.  CAVERS stands for "Credit Alert Interactive Voice Response System", and it is a system that Lenders run a Borrower through before processing a FHA Loan.

The purpose of CAVERS is to indicate if a Borrower is presently delinquent or if HUD has paid a claim on a loan the Borrower had in the previous three years which was insured (backed) by HUD.  If the Borrower is presently delinquent or had a claim paid in the previously three years, they cannot apply for another FHA Loan for three years.

Lenders cannot depend on just the information on a Credit Report when doing an FHA Mortgage, because it may not show the information revealed through CAVERS.  I had an example of this about two years ago when I submitted a loan for a Borrower who had an FHA Mortgage within three years of the loan application.  His Credit Report did not indicate a foreclosure within the three years, but when we ran the Borrower through CAVERS the report came back saying a HUD claim had been paid on a FHA Mortgage he had within the previous three years.

What had happened was this Borrower had a divorce, and a condition of the divorce was for him to give his wife complete ownership of their home.  In return she would assume complete responsibility for the mortgage.  After they divorced she went delinquent on the mortgage and eventually lost the house.  This triggered a HUD claim, but the Credit Report did not recognize the claim date, just the foreclosed date, which were not one in the same.  So now we had an issue which needed to be addressed quickly since he was under contract for a new property. 

Luckily for this Borrower he fell under one of the three HUD exception, which are:

• Assumptions, If the Borrower sells the property, with or without a release of liability.  The person who assumed the mortgage later defaults on the mortgage, but it can be proven the loan was not in default at the time the loan was assumed, then the Borrower can once again be eligible for another FHA Mortgage without waiting the three year period.

• Divorce, A Borrower may be eligible if the divorce decree or legal separation agreement awarded the property and responsibility for payment to the Borrowers former spouse.  But if the claim was paid at the time of the divorce the Borrower is not eligible.

• Bankruptcy, if the property was included in a bankruptcy that was caused by reasons beyond the Borrower's control such as:

• Death of the principal wage earner
• Loss of employment due to employer going out of business, or reduction-in-force, etc
  
• Serious long-term uninsured illness.

My Borrower fell into exception #2 so we were able to clear the CAVERS condition for him, by documenting the necessary proof he was no longer liable for the mortgage at the time his ex-wife defaulted on the loan.

A CAVERS report may also indicate other delinquencies, such as Department of Education, Veterans Affairs, etc.  If that is the case then those agencies need to be contacted because HUD cannot clear the Borrowers file in those cases, HUD can only clear their own files.

With all the foreclosures in recent years, CAVERS issues are more of a problem then in past years.  Hopefully this blog provided a better understanding of what HUD'S Credit Alert Interactive Voice Response System (CAVERS) is, and information on who is exempt from a negative CAVERS report if one has been filed under their name.

 

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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com