January 13, 2015
A reader asks, “How does FHA view a borrower with an expired tax lien? I was assessed additional taxes as the result of an audit in 1999. In 2005, a Federal tax lien was filed. I recently retained a tax attorney, who has confirmed that the lien was released in 2011 due to expiration/statue of limitations. I would now like to pursue FHA purchase financing. Assuming all other requirements are met, will this expired lien disqualify me?”
FHA loan rules do address tax liens–the information can be found in HUD 4155.1. According to Chapter Four:
“If, after checking public records, credit information or CAIVRS, a borrower is found to be presently delinquent on any Federal debt or has had a lien (including taxes) placed against his/her property for a debt owed to the Federal government, he/she is not eligible for an FHA mortgage until
• the delinquent account is brought current, paid, or otherwise satisfied, or
• a satisfactory repayment plan is established between the borrower and the Federal agency owed, which is verified in writing.
Tax liens may remain unpaid provided the lien holder subordinates the tax lien to the FHA-insured mortgage.”
Additionally, Chapter Four states:
“Lenders must use CAIVRS to screen all borrowers (except those involved in a streamline refinance), including nonprofit agencies acting as borrowers. The borrower is not eligible for Federally-related credit if CAIVRS indicates that he/she
• is presently delinquent on a Federal debt, or
• has had a claim paid within the previous three years on a loan made and insured on his/her behalf by HUD.”
CAIVRS refers to a system participating FHA lenders use, known as the Credit Alert Interactive Voice Response System. It’s true that the FHA loan rulebook does not specifically address the situation mentioned in the reader question, with respect to expired tax liens. This may be up to the lender’s discretion, or the lender may need to discuss the issue with an FHA rep to clear up any gray area there. Lender standards and certain federal laws may also apply, so the FHA might not have the final say in the matter.
The borrower should contact the FHA directly by calling 1-800 CALL FHA to get advice in this area.
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Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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