FHA, CAIVRS, default Student loans question

[Anonymous]

I recently revamped my credit score using a reputable Credit Law firm that did a great job with older medical bills and repayments from a period of financial hardship that I can easily document.

However, half of the 9 federal student loans were neglicated unknowingly. I thought I was paying a consolidated payment toward all my grad school loans (Stafford loans - dept of Ed, sub and Unsub). But inreality I was only paying towards part of the sum. I dealt with this on my own, so it’s not the fault the Credit firm, this is my fault pure and simple. But everything else is in great shape and on its way up.

I was preapproved for an FHA loan. My credit score is 590. BUT the CAIVRS came back with a large fed student loan amount I didn’t realize went unpaid. It was just transferred back to the gov on Sept 2018. Nothing on my credit report about it at all. Just on the CAIVRS. Aside from that I was good to go. I called, got a large payment set up starting Jan 1st with them towards that loan. I also paid $100 upfront in good faith to get the ball rolling. When I spoke to them last, they said they would not remove me from CAIVRS until I paid monthly for 12 months. Then they would remove the default.

What can I do to remove me from the CAIVRS report, if anything? Also, thought it was 9 months? Not 12? Can I consolidate on a repayment plan instead? Or am I stuck for a year without being able to apply for an FHA loan? Will documentation of the payment plan with the 1% of the balance in the debt to income work?

I’m too low for the conventional loan and I think they will continue to report the delinquency, even if I pay on time in full as I intend to. Which will prevent me from improving the score, even with good payments.

My income is great. Have more than enough for %20 down. I’m not sure how to fix this. My debt to income, even with the payment is good. My total student loan debt is 87k. I had 9 separate student loans. I’m happy to pay them, I just never received anything on the other unpaid loans. They had all my information so it seems very odd to me that they wouldn’t complain when a payment was made on the current loans. It didn’t even come up when I purchased a car this year (although my interest was high) no one made mention of any payment issues. Is there any other documentation on requirements for FHA with student loan default repayment?

Any help would be great! Thanks in advance.

[homeloanexpert]

Even if you are now paying your student loans, you will be on rehab for as much as 6 months. If you can't wait until you come off the Federal Credit Alert System (CAIVRS), you have another option which is a NonQM loan. These are not an Agency Loan Product but a Portfolio Program. Rates and fees are higher but with your scores this is your only option. These are a viable option for folks that have an exit strategy. I do several of these a month for folks who just don't fit into the box at the moment.

[VALoanMaster]

Hi Meems1013,

The fastest way to get off CAIVRS is to refinance the defaulted loans.

The other option is for you to get started making the payments & once you have made 3 monthly payments (you have to make a minimum of 3 monthly payments per FHA) you can try with a different lender.

I have discussed the issue of open CAIVRS hits on FHA loans with my head underwriter & he thinks we may be able to close an FHA loan with an open CAIVRS hit.

[Anonymous]

As someone who has been through this, you will have very little chance of getting any type of loan with a cavirs hit. FHA, USDA and VA require the underwriter to check cavirs. They may not do it at first, but in my experience it will be done at some point and you will be denied if you are not “cavirs cleared”. 

You need to get it cleared. The best way to do this is via the “loan rehabilitation” program. This requires 9 months of on time payments (within 20 days of the due date). There is papaerwork to do. The payments you have already made won’t count. Soon as you sign the papers and they give you a payment amount and due date payments start counting. After 9 payments are made, the government removes your default from your credit report (and it will eventually show on your report), removes you from cavirs and reassigned your loan to a new student loan servicer. 

I feel your pain, it was torture to go through this. It kills your credit score, it makes it difficult to get any credit (although car loans seem not to care) and any credit you do get is at highest rates.  I am 2 days from closing on fha loan and am still sweating it and will be until I get the keys.  But, the government does make it fairly easy to get it cleared. Once you are through rehabilitation you could see a jump in your credit score. You should immediately call the government and have them get you into rehabilitation. Check myeddebt.ed.gov for more info.