U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, D.C. 20410-8000 March 10, 1988 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER TI-394 MEMORANDUM FOR: ALL TITLE I LENDING INSTITUTIONS Attn: Installment Loan Department SUBJECT: Credit Alert Interactive Voice Response System Section 201.22(c) of the Title I regulations states that a Title I loan may not be approved if the lender has knowledge that the borrower is more than 30 days delinquent on any Federally guaranteed or insured loan. To assist lenders in verifying whether a borrower is in default or a claim has been paid on a loan or mortgage insured by FHA, the Department has instituted an automated information system known as the Credit Alert Interactive Voice Response System, or CAIVRS. The Credit Alert System CAIVRS is a supplement to, and not a substitute for, your normal credit underwriting procedures. Information to identify the lender and the borrower is entered into the system using a touch-tone telephone. The lender receives a voice response, indicating if (a) the borrower is in default on an FHA-insured home mortgage, or (b) a claim has been paid within the past three years on a Title I or Title II loan obtained by that borrower. The system does not contain information on other types of Federally guaranteed or insured loans (e.g., VA loans, student loans, etc.), nor does it contain information on other Title I loans obtained by the borrower if a claim has not been paid. Since August 1, 1987, all Title II mortgagees have been required to use CAIVRS to verify the status of borrowers before making any FHA-insured home mortgage loan. The system has now been expanded to include information on Title I borrowers whose defaults have resulted in insurance claims, and the Department has decided that Title I lenders should also be required to use CAIVRS as part of their credit examination procedures. Therefore, for all Title I credit applications dated on or after May 1, 1988, lenders will be required to use CAIVRS to verify the status of each borrower. The instructions for using CAIVRS are attached to this letter. Please distribute this letter and the instructions to all of your underwriting personnel to ensure that the proper procedures are followed. If a loan with a credit application dated on or after May 1, 1988 is later submitted for claim payment, a Credit Alert Access Code for each borrower must appear on the credit application (see step 8 of the instructions). If the borrower disputes the accuracy of the information provided by CAIVRS, please contact either the Title I Insurance Division or the Single Family Development Division, as appropriate. Addresses and telephone numbers are given in the instruction sheet. Underwriting Considerations The following underwriting considerations are for the use of Title I lenders in evaluating the creditworthiness of borrowers. They are not to be used in evaluating the borrower's eligibility for a Title II loan or mortgage. Where CAIVRS indicates a default on a home mortgage loan but the borrower asserts that the loan is now current, the borrower's statements should be verified through written documentation from the home mortgage lender. In addition, you should evaluate the borrower's payment history on this loan, to determine whether or not the default was caused by factors that are likely to recur. If a claim has been paid on either a Title I or Title II loan, the borrower is ineligible to obtain a Title I loan, unless one of the following situations exists: 1. The borrower can demonstrate that the debt to HUD resulting from a Title I claim has been satisfied or has been brought current in accordance with the original terms of the loan. If the borrower is unable to provide proper documentation, please contact the Title I Insurance Division at the address and telephone number in the instructions. 2. The borrower has been discharged from the loan obligation by order of the bankruptcy court, and you are satisfied that the borrower is now solvent and an acceptable credit risk. For Further Information If you have questions about this letter, please write to Robert J. Coyle, Director, Title I Insurance Division, 451 Seventh Street, S.W., Room 9160, Washington, D.C. 20410 or call the Division on (202) 755-6880. Sincerely yours, Thomas T. Demery Assistant Secretary _____________________________________________________________________ INSTRUCTIONS FOR USE OF THE CREDIT ALERT INTERACTIVE VOICE RESPONSE SYSTEM (CAIVRS) CAIVRS is designed to assist lenders in verifying that an applicant for a Title I insured loan is not delinquent or in default on an FHA-insured loan. The system is accessed by dialing (301) 588-2233 anytime from 9:00 a.m. to 9:00 p.m. Eastern Time, Monday through Saturday. Please note that this is not a toll-free number and that a touch-tone telephone must be used. CAIVRS operates in the following manner: (1) The incoming call will be answered and the caller will hear: "You have reached the HUD Credit Alert System. Please enter your 10-digit mortgagee number." TITLE I LENDERS ARE TO USE THEIR FIVE-DIGIT CONTRACT NUMBER, ADD FOUR ZEROS, AND THEN ADD THE CHECK DIGIT. For example, if your Title I contract number is 41797-1, you would enter 4179700001. (This number also appears on the mailing label with this Title I letter). (2) The system will then validate the mortgagee number you have entered. If the number is invalid, the following message will be recited: "This is not a valid number. Please re-enter your 10-digit mortgagee number." If, on the second try, the caller does not enter a valid identification number, CAIVRS will recite the message: "This is not a valid number. For further information, please call the Department of Housing and Urban Development on (202) 755-6857 if you are a Title I lender, or on (202) 755-0316 if you are a Title II lender." The call will then be terminated. (3) When the mortgagee number has been validated, the system will recite the following message: "Please enter borrower's social security number without dashes." Enter the first social security number. (4) The system will ask for verification of the social security number with the message: "You have entered nnn nn nnnn. If this is correct, enter 'Y'; if it is not correct, enter 'N'." The system will then make a beeping sound and wait for one digit to be entered. Your response must be made after the beep in order to be received. If "N" is entered, the system will permit two additional tries (allowing a total of three tries for entering each social security number). If on the third try the caller has not entered the correct number, the system will issue the message: "Please call the Data Transformation Corporation on (301) 587-4580, extension 325 for assistance." _____________________________________________________________________ 2. (5) The system will then search HUD's records of claims and defaults for a match on the social security number. If no match occurs, the system will recite the message: "There are no claims or defaults for this borrower," and will proceed to step 8. (6) If the records search indicates that a claim has been paid under Title I or Title II or the borrower is in default on an insured loan under Title II, the system will recite one of the following messages: "THERE IS A CLAIM FOR THIS BORROWER." "THERE IS A DEFAULT FOR THIS BORROWER." "THERE ARE CLAIMS AND DEFAULTS FOR THIS BORROWER." "THERE ARE CLAIMS FOR THIS BORROWER," "THERE ARE DEFAULTS FOR THIS BORROWER." (7) The system will then recite the Title I and Title II case numbers for any claims or defaults that have occurred, using the following format, as appropriate: "TITLE I CLAIM nnn nnn nnn." "FHA CLAIM nnn nnn nnn." "FHA DEFAULT nnn nnn nnn." The numbers will be spoken slowly to facilitate recording by the caller. (8) The system will then generate a Credit Alert Access Code and will recite the message: "Credit Alert Access Code is..." THIS CODE AND ANY INFORMATION ON CLAIMS OR DEFAULTS PROVIDED BY THE SYSTEM MUST APPEAR ON THE BORROWER'S CREDIT APPLICATION. THE CREDIT ALERT ACCESS CODE SHOULD BE ENTERED BELOW THE TITLE AT THE TOP OF THE APPLICATION. (9) The system will now instruct the caller: "Enter additional social security numbers or hang up now." Remember that the system can check only one social security number at a time. If the system detects a hang-up, the call will be terminated. Otherwise, the process is repeated starting with step 4. However, if more than 15 seconds elapse without the entry of another social security number, the call will be terminated. _____________________________________________________________________ 3. If the borrower disputes the accuracy of the information provided by CAIVRS, please contact the following individuals as appropriate: Title I Claims Title II Claims or Defaults Patricia Schader Howard Mayfield Title I Insurance Division Single Family Development HUD Building, Room 9166 Division 451 Seventh Street, S.W. HUD Building, Room 9270 Washington, D.C. 20410 451 Seventh Street, S.W. (202) 755-6857 Washington, D.C. 20410 (202) 755-6723 U.S. GOVERNMENT PRINTING OFFICE: 1988- 2 0 1 -9 1 2 / 8 0 0 2 3