The U.S. Department of Housing and Urban Development charged Fifth Third Bank and a mortgage company in Michigan with discriminating against a couple with disabilities when they tried to refinance their mortgage.
HUD alleges that the lender and Cranbrook Mortgage Corp. required the couple to obtain medical documentation to qualify for an FHA loan, which is a violation of the Fair Housing Act, HUD says.
What the rules are
“Persons with disabilities should not have to meet higher mortgage qualification standards because they rely on disability insurance payments as a source of income,” said Bryan Greene, HUD’s acting assistant secretary for fair housing and equal opportunity. “Banks and mortgage companies may verify income and have eligibility standards, but they may not single out homebuyers with disabilities or deny financing when they are otherwise qualified.”
The couple was using Social Security Disability income to qualify for the loan. The Federal Housing Administration’s guidelines say that income received from government assistance programs is acceptable to qualify for a loan “as long as the paying agency provides documentation indicating the income is expected to continue for at least three years.” Social Security income must be verified by the Social Security administration or from federal tax returns, the FHA says.
How HUD says the rules were broken
But Firth Third’s lending manual listed a physician’s statement as one of the acceptable documents to verify continuation of income for borrowers receiving disability-related income, according to the charges filed by HUD.
Barbara Grimsley, a spokeswoman for Fifth Third, said the bank does not comment on matters of litigation.
Following the lender’s underwriting guidelines, the mortgage broker asked the couple to obtain a note from the doctor stating that the couple would be eligible for benefits for the next three years, according to the charges. The couple told the broker doctors can only provide medical findings and can’t declare their eligibility for benefit payments.
How it ended up
Eventually, the mortgage company sent the couple a notice that their loan was denied because they were “unable to verify income,” and the couple filed a complaint with HUD.
HUD’s charge will be heard by a federal administrative law judge unless any party to the charge elects to have the case heard in federal district court.
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