The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General audited HUD’s Credit Alert Verification Reporting System (CAIVRS) to determine whether the default and claims data in CAIVRS agreed with the data in the Federal Housing Administration’s (FHA) default and claims systems.

We found that HUD’s CAIVRS did not contain information on all borrowers’ default, foreclosure, and claim activity.  It would incorrectly return accept codes for more than 260,000 borrowers who had been in default, foreclosure, or claim within the past 3 years. In addition, CAIVRS did not contain information for FHA borrowers with claims older than 3 years. Therefore, HUD did not provide other Federal agencies with sufficient information on FHA borrowers with delinquent Federal debt to meet the requirements of the Debt Collection Improvement Act, which bars delinquent Federal debtors from obtaining additional Federal loans or loan guarantees until such delinquency is resolved.

We recommend that HUD document the selection rules used for feeding data to CAIVRS, update the rules to provide for complete reporting of all ineligible borrowers, and develop system error checks to identify potential issues. We also recommend that HUD report FHA borrowers with delinquent Federal debt beyond the 3-year claim period or obtain an exemption from the Secretary of the Treasury to exempt these loans after 3 years.