Underwriting Denial Because of CAIVRS Report

I Received this email from Mike early this morning.

I had recently applied for a loan through a major bank, and had gone through the whole process, only to have been told that the underwriter wouldn’t approve the loan unless the CAIVRS report was removed. Unfortunately, I had to file chapter 7 bankruptcy and included my house, which had been financed through an FHA loan. Upon further investigation, the mortgage loan officer said that because there was a foreclosure, that the underwriter wouldn’t approve the loan. They told me to contact HUD, who told me that the claim couldn’t be removed, and that it was just a credit alert, and that it was just up to the lender whether they pay attention to it or not.

I had told this mortgage company exactly what had happened in the past, they ran my credit, and there was no indication that there was going to be a problem. I had applied for the new loan here recently, March 2008, and the chapter 7 Bankruptcy had discharged in December 2003. I looked on the State/county auditor’s website and noticed that the property I had defaulted on had changed title to HUD in 2003, and then into someone else’s name in April 2005.

I have since reapplied with another mortgage broker, who says he doesn’t see a problem, though I’m a bit concerned that I am going to have to pay all the costs all over again for nothing. The appraisal I got originally is not an approved person for the broker I am using now, so I’m having to pay another 300.00.

What kind of stumbling block was hit with the original mortgage company, and how can I think that this new company, using a broker, can give me a better chance of financing this loan? I’ve been told that I can’t go FHA because of the CAIVRS, but the issue is well over three years, unless they’re basing their decision on some other date that I can’t see, like a mortgage insurance claim, or something like that.

I’m a bit confused, and could use your help, advice, or attention, and an explanation, if you could please!

Thank you,

Mike


Answer: (updated 2012)

First, you need to understand that a CAIVRS report is only pulled on an FHA or VA loan  pulled on almost all loans now depending on the lender. You always need a clear CAIVRS to get an FHA loan, VA loan, or a USDA loan. I don't know of any lenders that will grant a loan if they know CAIVRS is not clear. A CAIVRS should have been checked up front to save you the expense and time delay. The bank should have known this.

If you were not applying for an FHA loan the bank should not have pulled a CAIVRS at all unless they are running scared because of the industry issues. Banks are really getting paranoid and have always been cookie cutter conservative.

A reputable Broker is always the best place to get a mortgage. It is the only thing they do and they usually have 40 to 60 lenders to send your loan to and they shop the interest rates for you. A good Broker will always try to place you in the best product at the lowest rate available.

Banks specialize in checking, savings, credit cards, and small loans. Their Mortgage Department, in most banks, cherry pick the loans they want to do. I know Brokers are getting a bad rap right now but that is because the large lenders are not willing to take the heat for funding loans that didn't qualify or for lowering the standards so far that people defaulted. Trust me, the independant broker doesn't set the standards. They have to operate by them or they can't get their loan funded.

Sorry I got a little off topic but I just hate seeing people get jacked around.

Based on the discharge date, you should qualify for conventional financing if you have re-established credit and no lates since the bankruptcy. Seems to me the bank should have switched it to conventional.

This is based on the information you provided. Naturally you would still have to qualify based on other factors such as income, DTI, and down payment.

Best of Luck,

Connie


(added 2012)

The following link should help anyone with caivrs questions and it has a link to the Caivrs page near the bottom.

http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/ref/sfhp2-09