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CFPB Issues Warning on Documenting Disability Income

Posted on 11/19/2014

Probing for details on a potential borrower's Social Security disability benefits runs afoul of the Equal Credit Opportunity Act and Regulation B, the Consumer Financial Protection Bureau said in a bulletin on Tuesday.

Although lenders may generally consider the duration of public benefits when documenting income, pressing too far on the details of a disability -- by requiring a doctor's note, for example -- raises fair lending risks, the Bureau said.

The CFPB reiterated its guidance under the Ability-to-Repay/Qualified Mortgage rule, which allows lenders to document disability income through a benefit verification letter from the Social Security Administration. Should the letter not specify an expiration of benefits within three years of origination, "the creditor shall consider the income effective and likely to continue," the bureau said.

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