The Treasury Department (DOT), the Small Business Administration (SBA) and other federal agencies, such as the USDA, the VA or even the SEC, can track people who have defaulted on federal obligations, including direct or guaranteed federal loans, incurred a federal lien or judgment or have had a claim paid by one of many government agencies.
If you're sporting this badge of dishonor, you already may have missed out on a home loan. Authorized employees of participating federal agencies access this list of delinquent federal borrowers for the purpose of prescreening loan applicants for credit worthiness.
SBA loan applicants, FHA, VA, USDA applicants beware
Approved private lenders acting on the government's behalf can also access CAIVRS to screen applicants for federally-guaranteed loans. If you're applying for an SBA loan, FHA loan, VA loan or USDA loan, this means you.
You won't have access to CAIVRS yourself, but your mortgage lender should check CAIVRS first thing when you apply for a mortgage. The last thing you want is to get loan approval or preapproval, only to get bad news within days of closing that your name was found on the CAIVRS list.
How you got on the list, and what to do about it
Here are four ways you may have made this alleged deadbeat list, and what to do if you're on it when you apply for a home loan:
Once you miss payments on your student loan, the maturity dates of your promissory notes are accelerated, which makes payment in full due immediately. You are no longer eligible for any type of deferment or forbearance. Additional consequences can include garnishment of your wages, offset of your federal and/or state income tax refunds (and any other payments you have coming), and lost eligibility for other federal loans such as FHA or VA mortgages.
Government-backed student loans are practically impossible to discharge. You can't unload them even through bankruptcy filing. Additionally, there is no statute of limitations for enforceability of defaulted student loans.
What to do: To restore your eligibility for government-guaranteed mortgages, try the following:
If your lender was unable to recover your entire loan balance in a foreclosure sale, HUD would have been obligated to pay a claim for the amount of the deficiency, and you would have lost your eligibility in the process.
Your eligibility is not restored until three years after HUD paid the claim, which could be much later than the foreclosure date.
What to do: Wait it out. According to HUD's website, you will remain listed on CAIVRS for 38 months after the claim is paid, but you will be eligible for a mortgage after 36 months.
CAIVRS contains data reported by the following agencies:
Notice that the Internal Revenue Service (IRS) is not on this list; it doesn't report to CAIVRS. However, IRS liens are reported to credit bureaus, and IRS installment agreement payments must be disclosed to your lender and included in your debt-to-income ratios.
What to do: Most FHA lenders will want to see a satisfactory payment history (usually 12 months) before approving you for a mortgage, so get current well before you shop for a home. If there is a tax lien, the IRS must agree to subordinate it to the new mortgage.
Of course, a final possibility is that you're not supposed to be on CAIVRS at all. Perhaps you've satisfied a creditor, or perhaps more than 36 months have gone by since a claim was paid. (You may even have had a claim paid but fall under one of HUD's exceptions that allow you to get an FHA loan despite being on CAIVRS.)
What to do: If you turn up on CAIVRS, your lender is given the name of the agency reporting the default, the case number of the defaulted debt, the type of delinquency (default, claim, foreclosure, lien or judgment), and a telephone number to call for further information or assistance.
Your loan officer can pass this information on to you, and you should contact the reporting agency and clear the error before your scheduled mortgage closing. It's your responsibility to contact the agency yourself and resolve the issue. Your lender cannot delete CAIVRS information, even if you have proof that you are listed in error.
If you're applying for an FHA loan, the FHA also can't help you get off CAIVRS directly. It can neither remove correct CAIVRS information nor alter or delete CAIVRS information reported from other federal agencies.
Dealing with the idea that you might be facing SBA loan default can be terrifying. The SBA attorneys in our office are skilled at helping clients understand all of the facets of their situations. If, for instance, you need to know what an SBA offer in compromise is, you can simply ask your lawyer. You should never face SBA loan problems alone. It is important to retain the services of an attorney who can help you through this difficult time in your life. We urge you to read about the services that we have available and to contact us if you believe that we can be of assistance to you right now.
Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure
Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements
Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.
Small business sole proprietor obtained an SBA COVID-EIDL loan for $500,000. Client defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for aggressive collection. Treasury added $180,000 in collection fees totaling $680,000+. Client tried to negotiate with Treasury but was only offered a 3-year or 10-year repayment plan. Client hired the Firm to represent before the SBA, Treasury and a Private Collection Agency. After securing government records through discovery and reviewing them, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury citing a host of purported violations. The Firm was able to negotiate a reinstatement and recall of the loan back to the SBA, participation in the Hardship Accommodation Plan, termination of Treasury's enforced collection and removal of the statutory collection fees.
Small business and guarantors obtained an SBA COVID-EIDL loan for $1,000,000. Clients defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for collection. Treasury added nearly $500,000 in collection fees totaling $1,500,000. Clients were served with the SBA's Official 60-Day Notice and exercised the Repayment option by applying for the SBA’s Hardship Accommodation Plan. However, their application was summarily rejected by the SBA without providing any meaningful reasons. Clients hired the Firm to represent them against the SBA, Treasury and a Private Collection Agency. After securing government records through discovery, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury. During litigation and before the OHA court issued a final Decision and Order, the Firm successfully negotiated a reinstatement and recall of the loan back to the SBA, a modification of the original repayment terms, termination of Treasury's enforced collection and removal of the statutory collection fees.
Clients personally guaranteed an SBA 7(a) loan that was referred to the Department of Treasury for collection. Treasury claimed our clients owed over $220,000 once it added its statutory collection fees and interest. We were able to negotiate a significant reduction of the total claimed amount from $220,000 to $119,000, saving the clients over $100,000 by arguing for a waiver of the statutory 28%-30% administrative fees and costs.
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