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Broker and bank hammered by HUD for discrimination

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Mortgage Professional America | 23 Aug 2013, 06:04 AM Agree 0
A major bank and an Ohio mortgage broker are being charged with discriminating against a couple with disabilities, according to the Department of Housing and Urban Development
  • Mario | | 23 Aug 2013, 10:17 AM Agree 0
    This is kind of surprising and I am sure is worrying a couple corporate attorneys around the county since near every lender I have ever worked with required this documentation.
  • Bayview Mortgage Inc | | 23 Aug 2013, 11:34 AM Agree 0
    The groups need to reclassify disability payments as insurance payments and not income payments. Just sounds like in competent lawyers.
  • Robert | | 23 Aug 2013, 11:36 AM Agree 0
    40 years in mortgage business and have always provided the social security awards letter as verification, and that has always been acceptable proof. Never required to get letter from Dr.
  • julie | | 23 Aug 2013, 12:26 PM Agree 0
    that happened to me over a year ago - I didn't want to get documentation because I felt it was violating HIPAA law - sounds like it does
  • Michele | | 23 Aug 2013, 12:40 PM Agree 0
    It's a Fannie Mae guideline that they have to prove that income will continue into the future at least three years. Some people are disabled for short periods and if that is the case the stream of income will not continue long enough to be considered stable to make mortgage repayments. Every form of income requires that it be documented that it will continue into the future in order for it to be considered reliable income. Is that such a bad thing that someone making a huge mortgage require that they have a way to repay far into the future? I don't believe it's discrimination. It's just making sure they have a way to make the payments which we are all supposed to be doing. If they didn't do that and the disability was for six months and then they couldn't make the payments down the road and the bank had to foreclose who pays for the loss?

    At some point they are going to have to decide which way they want it. Do they want lenders to prove borrowers have the ability to repay the mortgage or do they not ask sensitive questions when their income has to do with a disability?
    Why would it be a problem to supply documentation from a doctor regarding how long the disability was expected to continue? Why would that be a secret when the disability is directly tied to their income? I would bet the lender doesn't care one bit about what the disability is or isn't. They would only care about the length of time it's expected to continue in order to judge whether it's sufficient length of time to rely that they'll make their payments. Something is very suspicious here.
  • Colan Quillman | | 23 Aug 2013, 12:48 PM Agree 0
    The rules just get crazaer and crazier. There are so many persons on disability pension that some have got be bogus. The SSI fund is running out of money largely because there are so many persons on disability pension. The SSI has got to tighten up and retract some of these pension. When they do then some persons who qualified, will have a difficult time making payments. Then it will be the Brokers fault- he should checked.

    I am a retired Broker and glad I don't have to try to function in the crazy world we Americans have developed in the last few years. Good luck to you still out there- don't do anything wrong or the Government will get you.
  • Ellen | | 23 Aug 2013, 01:23 PM Agree 0
    I was in the mtg business for 30 years. I always had to prove that the disability insurance was to continue for a period of time to insure that they could pay for the mortgage with some certainty. Everybody cries foul if they can't get what they want. and the govt goes along with it. Suck it up!!! Do u want the mortgage or not? I got out of the business because the govt regs which still don't apply to banks.
  • Glenn | | 23 Aug 2013, 04:01 PM Agree 0
    About 30% of my borrowers use disability income to qualify (weird niche, but I enjoy it). Fannie Mae guidelines specify that an SSI or SSDI award letter is sufficient proof of continuation of income. The only time you need a doctor's letter is when the disability income comes from another source, like L&I or Workman's Comp. I have fought this battle with underwriters many times and win every time. I expect many more companies will be sued once word gets out.
  • Blue Eyes | | 24 Aug 2013, 08:08 AM Agree 0
    Now there's a catch 22. If the laon bellies up, HUD may not pay the claim because no documantation of income continueance was provided, the result Mr. lender,
    Glad I retired, too many overlays and uncertanty with the Gov't agencies underwriting guidelines.
  • Eileen | | 25 Aug 2013, 09:02 AM Agree 0
    With regular income qualification the buyer only has show 2yrs work history, although the day after the mortgage closes he can be let go or quit and go on SSDI or unemployment then doesn't have to prove anything?? so nothing is for sure and SS disability should not be viewed as a guarantee nor 2 yr work history. This is discrimination .
  • Mello | | 27 Aug 2013, 06:56 PM Agree 0
    A person receiving child support must prove continuance for 3 years.. What's the problem with getting a letter from the Dr. If you have a long term disability, all that is needed is the
    letter to prove it.
    Possible Solution: Prior to the hearing, have HUD, Fannie, Freddie, VA and USDA issue an opinion regarding mortgage buybacks when a person cannot or refuses to provide continuance of income (to include persons who are not disabled). Then perhaps the court will have solid proof that they do or do not require proof and perhaps the court can issue a ruling that forbids mortgage buybacks based on lack of proof of continuance.
  • Glenn | | 28 Aug 2013, 09:10 AM Agree 0
    I'm surprised by the confusion on this topic. In order for a person to receive SSI or SSDI, they have to prove that they are disabled and that their disability is permanent or is likely to continue for a long time. The only way they lose their benefits after that is their earned income exceeds the program limits - meaning if they don't have disability benefits coming in, it's because they have a greater amount of earned income coming in. The point is - they have ALREADY proven income continuance once they produce an SSI or SSDI Award Letter. Making them go to the doctor for a note is unnecessary, an added expense, and many doctors will refuse to write such a letter because they don't want to get in the middle of an issue they have nothing to do with. Other types of disability benefits don't have this level of scrutiny or the safety net of having replacement income in place should the benefit end - hence the 3 year continuance rule applies there. But SSI and SSDI is clear - it is in the mortgage guidelines - an SSI or SSDI Award Letter IS proof of continuance and no other proof is needed.
  • DMC | | 04 Sep 2013, 12:43 PM Agree 0
    I had a situation some years ago that required a letter from the doctor to state that the disability was "permanent". With all the foreclosures and fraud in this industry in the recent past we should be taking steps to ensure income is real and ongoing. I don't agree with any discriminatory lending practices. And we as brokers are charged with submitting good mortgage files with accurate and provable information. I don't see that as discriminatory.
  • Barbara Coker | | 04 Sep 2013, 01:27 PM Agree 0
    FHA Mortgagee Letter 12-15, dated August 17, 2012 made a major change in how lenders verify continuance of various SSA incomes. If their awards letter shows it will expire within a 3 year period, it would only be considered a compensating factor. Letters with no expiration date are now assumed to continue for the next 3 years. So for the first time in the 30 years I have been a mortgage officer, we weren't allowed to verify the 3 year continuance of this income. If they are being sued for mortgages underwritten prior to this date, that wouldn't be fair. But how often is the government fair to lenders these days?
  • Glenn | | 04 Sep 2013, 03:21 PM Agree 0
    The difference here is significant. SSA and SSI are completely different in what is required to qualify. To qualify for SSI, you have to jump through major hoops and have medical proof (at least that is the way it is supposed to work). Therefore, once they have an SSI letter, they have their continuance proof and nothing else is required. Sending them to the doctor for an exam is discriminatory, creating a barrier to home ownership to a protected class of people.
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