10.2 CREDIT ELIGIBILITY REQUIREMENTS (03/09/16)

© RHS HB-1-3555 SFH Guaranteed Loan Program Technical Handbook

The lender must investigate all major indications of derogatory credit to determine whether the reported information is accurate, and whether there is an acceptable explanation for the problem that may justify an exception. Failure to understand the nature of a credit problem could cause an application to be rejected on the basis of inaccurate or incomplete information. Attachment 10-A illustrates the method used to evaluate an applicant's credit history when a loan is manually underwritten by an approved lender and does not qualify for abbreviated documentation noted in Chapter 15 of this Handbook. These indicators must be followed consistently; however, the lender can make exceptions in limited circumstances, as described in Paragraph 10.8. Attachment 10-B illustrates the hierarchy of the credit review.

In addition to analyzing the credit report, an applicant is automatically ineligible for a guaranteed loan if they are presently delinquent on a non-tax Federal debt.

If the applicant(s) has had a previous Agency loan that resulted in a loss to the Government, has been settled, or is subject to settlement, additional documentation may be required of the applicant(s) to determine if the loss incurred was beyond the control of the applicant and if any identifiable reasons for the loss still exist.

The lender must verify that the applicant has no delinquent Federal debt through the Credit Alert Verification Reporting System (CAIVRS). CAIVRS is a Federal government-wide repository of information on those individuals with delinquent or defaulted Federal debt, and those for whom a payment of an insurance claim or guarantee loss claim has occurred. An applicant with an outstanding judgment obtained by the United States in a Federal court, other than the United States Tax Court, is noteligible for a guarantee unless otherwise stated in this Chapter.

Lenders are responsible for screening all applicants using HUD's Credit Alert Verification Reporting System. When a lender utilizes the Agency's automated underwriting system, the CAIVRS confirmation is automatically retrieved once the application is entered. When a lender does not utilize the Agency's automated underwriting system, the lender must obtain and record in the lender's mortgage file the CAIVRS confirmation number. For manually underwritten loans, the Agency will obtain a CAIVRS confirmation number in GLS through the service available. Each request of the CAIVRS service for the same applicant will record different confirmation numbers.

Lender instructions for accessing CAIVRS are included in Appendix 7. The presence of delinquent non-tax Federal debt cannot be waived by a lender.