The Question
The CAIVRS waiting period is important if you had a FHA mortgage on a home that was lost to foreclosure, deed in lieu of foreclosure or short sale.
That is the subject of a great question I received this week from Jennifer in Tennessee.
Could you please tell me when the 3-year CAIVRS countdown starts?
Is it when the Sheriff’s Deed is recorded after the Sheriff’s sale, or is it when the bank re-sells the home. I ask because our bankruptcy was in 2011, foreclosure ended and sheriff’s deed was recorded 4/16/14.
However, the home wasn’t re-sold for another 2 years (August 2016). We are in the middle of a contract and don’t want to lose this home. I’m really hoping that the 3-year period starts after the Sheriff’s Deed is recorded. Thank you! Jennifer in Tennessee
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The Answer
CAIVRS is a Government database that tracks credit delinquencies and default on Government debt. If you experienced a foreclosure, short sale or deed in lieu of foreclosure on a FHA mortgage, your waiting period before being eligible for another FHA mortgage is determined by CAIVRS, and not the foreclosure or resale date.
FHA normally requires a 3 year waiting period from a foreclosure.
When the foreclosed mortgage was a Government insured FHA loan, the waiting period begins from the date that the mortgage insurance claim is paid to out to the lender who held the FHA loan that defaulted.
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The mortgage insurance claim is paid out after the foreclosing lenders submits the claim to the Department of Housing and Urban Development (HUD). This is where it can get tricky.
Since the waiting period begins from the date that the insurance claim is paid, the 3 year clock does not start until after the foreclosing lender submits the claim. If the lender delays submitting a claim, this could delay your FHA waiting period
CAIVRS is not directly accessible to consumers so you may need the help of a FHA approved lender to determine when you will be eligible for a new FHA mortgage.
Avoid the CAIVRS Waiting Period
You can avoid the CAIVRS waiting period by not using a FHA mortgage to buy a new home.
If using a Conventional mortgage, the waiting period begins from the date of the Sheriff’s sale or the date that your name is removed from title as the owner of the home. You do not ever have to wait until the bank sells the home to a new owner.
In Jennifer’s scenario above, the mortgage was included in a bankruptcy and she could be eligible for Conventional financing after 4 years from the bankruptcy discharge date. Here is the Fannie Mae underwriting guideline that would allow you to avoid CAIVRS completely after a bankruptcy.
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Foreclosure and Bankruptcy on the Same Mortgage
If a mortgage debt was discharged through a bankruptcy, the bankruptcy waiting periods may be applied if the lender obtains the appropriate documentation to verify that the mortgage obligation was discharged in the bankruptcy. Otherwise, the greater of the applicable bankruptcy or foreclosure waiting periods must be applied.
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