[Note: Posting was delayed by the widespread power outages in the Metripolitan DC area]
Today I would like to follow up on an issue that I reported on in a newsletter earlier this year. Back in March I told you about an action by HUD against Bank of America charging B of A with discrimination under the Fair Housing Act against disabled borrowers. Borrowers who were using disability income to qualify for a mortgage were required to provide detailed medical information so that the underwriter could determine how long the disability income would continue. The general rule for non-employment income is that the payments must continue for at least three years in order to be used in calculating the borrower’s total “qualifying” income, so B of A and other lenders were asking for letters from the treating physician describing the nature and extent of the disability.
It was my opinion that although it was a close call, HUD would not likely prevail, primarily because it did not seem to me that having to disclose information about a disability was any more intrusive than many of the other personal matters about which applicants must disclose in order to qualify for a mortgage. One example I gave was that separated or divorced borrowers must provide the lender with their marital separation agreement, which typically contains a number of very personal matters, in order for their application to be approved.
It appears that I was wrong and FHA was right about this practice being a violation of the Fair Housing Act. I have not seen any official decision but I can certainly read between the lines of this June 25, 2012 announcement by Wells Fargo Home Mortgage, which reads in part:
“Effective immediately … For all disability income, under no circumstances should the borrower or [the borrower’s] Doctor be asked to identify the condition/disability of the borrower.”
“The SSDI (social security disability) award letter is deemed to satisfy the three year continuance expectation.”
Clearly a regulator, court or other authority has placed questions about the nature of a disability beyond the reach of lenders and their staff. Persons receiving disability income are entitled to rely on the award letter as proof of continuance of the income, and lenders are not permitted to inquire into the nature or extent of the disability.
I hope those of you still without electricity due to last Friday night’s storm get power back soon, and that your yard cleanup is not too bad. Happy Independence Day and enjoy the holiday!
Steven Hofberg, Operations Manager, Residential Mortgage Center Inc
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Residential Mortgage Center Inc - www.rmcenter.com