If you want to take out a government-backed home loan (such as an FHA or VA loan), the mortgage lender will check your name against a specialized database called the Credit Alert Interactive Voice Response System (CAIVRS). The lender uses the database to determine if a loan applicant has federal debt that is currently in default or foreclosure, or if the reporting agency has paid a claim within the last three years. A few of the government agencies that might report to CAIVRS are:
If your name shows up on a CAIVRS search, your chances of getting another government-backed loan, including a home loan, might be delayed. Two of the most common hits on a CAIVRS search are federal student loan and FHA loan defaults. A borrower won't be eligible for a new government-backed loan until the CAIVRS record gets cleared. For student loan borrowers, this usually means paying off the debt in full or establishing a repayment plan with the debt holder. If your name shows up on a CAIVRS search because you lost a government-backed loan to foreclosure, you'll have a three-year waiting period.
~Attorneys Amy Loftsgordon & Cara O'Neill