A common but difficult to prove required mortgage loan stipulation in the past was if a borrower receives Social Security disability or other type of disability income, the borrower had to proof that the income is likely to continue for 3 years from closing. This practice is not allowed as per the Consumer Financial Protection Bureau (CFPB) as it is considered discriminatory. Mortgage companies define a source of income as “current documented income that is likely to continue for at least 3 years from closing”. Well there are protected classes and the disabled is an important one.
For instance, recently a buyer asked questions about the purchase of a home. She had talked to several mortgage lenders and up-front, she let me know that both she and her husband receive SSI disability income and do not make much money per her description of their situation. Because of conversations with the other lenders, she was familiar with debt ratios and other qualifying areas. One comment that I made surprised her though after she said that she can prove that they have permanent disability: I told her that I do not need proof that her disability will continue and I just need to prove that she does receive the income by an award letter and bank statements to prove receipt. “But the other lenders said I need a doctors signed letter!”, she said. We told her that lenders may not ask for that proof and she told me how I should share that with everyone because most that she spoke with were of a differing opinion. So therefore, I am writing and sharing this blog as it is very important for lenders to remember and most importantly, for someone that is disabled to know that their disability income is allowed.
The above scenario is protected by The Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B. The CFPB complete bulletin that references Social Security Disability Income Verification is found here.