WASHINGTON (11/20/14)--New guidance has been released by the Consumer Financial Protection Bureau (CFPB) to ensure consumers receiving disability income get fair treatment from lenders. The bulletin is intended to inform lenders of standards and guidelines protected by fair lending laws.
Qualifying for a mortgage can be a challenge for the more than 15 million Americans receiving Social Security disability, due to a lack of documentation regarding how long benefits will last. According to the bureau, the Social Security Administration (SSA) generally only provides proof that consumers are receiving benefits.
Lenders are required to examine Social Security benefit income for qualified mortgage debt-to-income ratios under the ability-to-repay rule. According to the bureau, unless the SSA benefit verification letter specifically states that benefits will expire within three years of loan origination, lenders should treat the benefits as likely to continue.
"Lenders can consider the source of an applicant's income for determining pertinent elements of creditworthiness," the bulletin reads. "However, lenders may face fair lending risk if they require documentation beyond that required by applicable agency or secondary market standards and guidelines to demonstrate that Social Security disability income is likely to continue."
The CFPB's bulletin contains information on guidelines from several agencies, which includes:
The Equal Credit Opportunity Act prohibits creditors from discriminating against an applicant because some or all of the applicant's income is from a public assistance program, which includes Social Security disability income.