6. Required Search for and Treatment of Debts Owed to the Federal Government
Change Date
April 10, 2009, Change 10
• Subsection d has been updated to note the elimination of the telephone method of accessing CAIVRS.
• This section has been updated to correct hyperlinks and make minor grammatical edits.
a. The Search Requirement
There are two separate procedures the lender must follow. Both should be initiated immediately upon receipt of a loan application to avoid delays in closing the loan.
(1) Ask the veteran and any veteran co-obligors (including spouse if a veteran) if he or she:
- is receiving VA disability benefits,
- would be entitled to receive VA disability benefits, but for the receipt of retired pay,
- has received VA disability benefits in the past, or
- is an unmarried surviving spouse of a veteran who died on active duty or as a result of a service-connected disability.
If the veteran falls under one of the above categories, follow the procedures discussed under subsection b “Debt Related to VA Benefits” of this section.
(2) For all applicants and co-obligors (veteran or nonveteran) on all VA loans including IRRRLs, perform a CAIVRS inquiry.
Reference: See “CAIVRS Procedures” in this section.
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6. Required Search for and Treatment of Debts Owed to the Federal Government, Continued
b. Debt Related to VA Benefits
Before processing a loan involving certain veterans, as described in section
a (1) “The Search Requirement,” the lender must submit VA Form 26-8937, Verification of VA Benefits, to the VA office where the loan application and/or closed loan package will be sent. VA will complete and return the form to the lender.
The loan cannot be submitted for prior approval or approved under the automatic procedure until the lender obtains the completed form from VA. The lender must maintain the completed form with the loan package.
If the form indicates that the applicant receives a nonservice-connected pension or has been rated incompetent by VA, the loan cannot be closed automatically. Submit the loan for prior approval.
If the form indicates that the applicant has any of the following:
• an outstanding indebtedness of overpaid education, compensation, or pension benefits,
• an education or direct home loan in default,
• an outstanding indebtedness resulting from payment of a claim on a prior guaranteed home loan,
• a repayment plan for any of these debts that is not current, then one of the following must accompany the loan package:
- evidence of payment in full of the debt, or
- evidence of a current repayment plan acceptable to VA and evidence that the veteran executed a promissory note for the entire debt balance.
-
Note: No promissory note is required in cases referred to the Department of Justice, Government Accountability Office, or VA Regional Counsel for judicial enforcement. In such cases, VA will obtain information on the applicant’s debt status from these parties and relay pertinent information to the lender.
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6. Required Search for and Treatment of Debts Owed to the Federal Government, Continued
b. Debt Related to VA Benefits (continued)
VA may find a repayment plan acceptable if:
• the veteran has been satisfactorily making payments on a repayment plan in effect prior to the lender’s inquiry,
• the veteran’s overall credit history and anticipated financial capacity after the proposed loan is made indicate a reasonable likelihood that the repayment plan will be honored and the outstanding amount of indebtedness is not so large that it would prevent payment in full, within a reasonable period (approximately 1 year), or
• the case involves unusually meritorious circumstances.
Example:
Consideration would be given to a veteran with an outstanding credit history and adequate income whose debt balance is too large to be reasonably paid out in less than 18 months to 2 years.
VA will offer special consideration to a veteran’s claim that he or she was not previously aware of an overpayment of benefits.
c. What is CAIVRS?
CAIVRS is a Department of Housing and Urban Development (HUD) maintained computer information system which enables participating lenders to learn when an applicant has previously defaulted on a federally-assisted loan. The system’s interactive voice response function provides instant credit information.
The database includes default information from the Department of Agriculture, Department of Education, Department of Justice, HUD, Small Business Administration, Federal Deposit Insurance Corporation, and VA.
The VA default information included in the database relates to:
• overpayments on education cases,
• overpayments on disability benefits income, and
• claims paid due to home loan foreclosures.
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d. CAIVRS Procedures
VA assigns an 11-digit VA lender identification number (ID) to each new lender (See section 12 of chapter 1), then automatically forwards the ID number to HUD with a request to grant the lender CAIVRS access. The lender can begin accessing CAIVRS usually between 1 week and 10 business days after receiving its VA ID number assignment.
Lenders must perform a CAIVRS screening on all obligors on the loan (including IRRRL loans). The one exception to this policy is that CAIVRS is not required for non-purchasing spouses in community property states.
On October 1, 2008, HUD discontinued all telephone access to CAIVRS. As of that date, lenders must obtain CAIVRS information via the Internet.
Internet Access for Federal Housing Administration (FHA) Approved Lenders
FHA-approved lenders who are currently accessing CAIVRS via telephone and who have FHA Connection User IDs, should request that their FHA Connection Application Coordinator update their FHA Connection profile to include CAIVRS. FHA approved lenders who do not have FHA Connection User IDs, should access the FHA connection at
https://entp.hud.gov/clas/index.cfm, and select Registering a New User to request a User ID and access to CAIVRS.
Internet Access for Non-FHA Participating Lenders
Non-FHA participating lenders who are currently accessing CAIVRS via the telephone should request online access from
http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm, select the Using CAIVRS option. Once at the site, select Registration for Lender User ID from the main menu and complete all fields. Select Veterans’ Affairs for the Agency field and enter the first 10 digits of your VA Lender ID. Each non-FHA participating lender must request at least one Application Coordinator ID as well as a Standard User ID for each individual user.
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d. CAIVRS Procedures (continued)
Please direct questions concerning problems encountered with online registration or access to the HUD Resource Center at 1-800-CALL-FHA (1-800-225-5342).
Once screening is complete, enter the CAIVRS confirmation code on VA Form 26-6393, Loan Analysis, in the space to the right of the “no” block in item 46.
For IRRRLs, enter the code on VA Form 26-8923, IRRRL Worksheet, beside the word “Note” located near the bottom of the form.
e. Applicant Presently Delinquent
Give full consideration to the CAIVRS information, and any subsequent clarifying information provided, in applying VA credit standards.
• Consider the terms of any repayment plan in analyzing monthly debt payments.
• Consider any delinquencies in determining creditworthiness.
CAIVRS information is only for the lender’s and applicant’s use in processing the loan application. Only those persons having responsibility for screening applicants and/or co-obligors may use CAIVRS. Any other use is unauthorized.
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e. Applicant Presently Delinquent (continued)
If the CAIVRS screening indicates an applicant (or co-obligor) is presently delinquent or has had a foreclosure or a claim paid on a loan made, guaranteed, or insured by a Federal agency, take the following actions:
Step
Action
1
Suspend processing of the loan application.
2
Contact the applicant or co-obligor for information regarding the loan default, foreclosure, or claim.
If a previous VA loan is involved, the applicant may call
1-800-827-0648 to make arrangements to repay the debt.
3
Contact the Federal agency that reported the applicant to CAIVRS if further information is needed.
Use the phone number provided by CAIVRS (Step 7 in the previous table).
f. Treatment of Federal Debts
An applicant cannot be considered a satisfactory credit risk if he or she is presently delinquent or in default on any debt to the Federal Government until the delinquent account has been brought current or satisfactory arrangements have been made between the applicant and the Federal agency. The refinancing of a delinquent VA loan with an IRRRL satisfies this requirement.
An applicant cannot be considered a satisfactory credit risk if he or she has a judgment lien against his or her property for a debt owed to the Government until the judgment is paid or otherwise satisfied.