When a borrower applies for an FHA guaranteed mortgage, the lender is required to determine whether the borrower is a good risk by examining credit rating, the applicant’s debt-to-income ratio, and employment. But the lender also has some other checking to do.
FHA loan rules state, “To determine whether a borrower is eligible to participate in an FHA mortgage loan transaction or must be rejected, the lender must:
examine HUD’s LDP list, the GSA List and CAIVRS, and document the reviews on the HUD-92900-LT, FHA Loan Underwriting and Transmittal Summary.”
What do all those abbreviations mean? “LDP” stands for “Limited Denial of Participation”. GSA is short for “U.S. General Services Administration List of Parties Excluded from Federal Procurement or Non-procurement Programs”. The acronym “CAVIRS” refers to “HUD’s Credit Alert Interactive Voice Response System”.
What is the purpose of checking all of those things? According to the FHA official site, “A borrower is not eligible to participate in FHA-insured mortgage transactions if he/she is suspended, debarred, or otherwise excluded from participating in HUD programs.
A lender must reject a borrower from participation if the borrower is on the
HUD Limited Denial of Participation (LDP) list
U.S. General Services Administration (GSA) List of Parties Excluded from Federal Procurement or Non-procurement Programs,
HUD’s Credit Alert Interactive Voice Response System (CAIVRS), unless an exception exists.”
FHA loan rules for eligibility add, “A borrower must also be rejected if he/she is presently delinquent on any Federal debt or has a lien placed against his/her property for a debt owed to the United States Government.”
These are important facts to know when applying for an FHA guaranteed home loan; borrowers with federal debt must take steps to address that debt prior to applying for an FHA home loan. For those who appear on the lists mentioned above, the best course of action is to call the FHA directly to see what may be done to be removed from those lists or the waiting periods required to be removed from them if possible.
Do you have questions about FHA mortgages? Ask us in the comments section.