Bank of America Settles Discrimination Lawsuit

| September 17, 2012 | 4 Comments More

Bank of America complains that the federal government is allowed to handle disability income one way while other lenders have to handle it differently. Double standard?

Bank of America reached a settlement with the Department of Justice (DOJ) last week resolving accusations that it violated the Fair Housing Act by “asking disabled mortgage loan applicants to provide letters from their doctors to document the income they received from Social Security Disability Insurance (SSDI).” While the letters alone were not necessarily an issue, some applicants had to provide additional, detailed medical information in order to prove their income[1]. While this caution might make some sense at first since the lender would naturally want to verify that claimed income actually existed and could be counted on to continue, “invasive requests for medical information” are considered a violation of privacy by the DOJ. BofA will not only pay up to $5,000 to eligible applicants who faced possible related discriminatory practices, but will also search around 25,000 additional loans in case other victims remain unidentified.

Although the lender opted to settle the lawsuit out of court, BofA has complained publicly via a statement made Thursday that “the government’s position has been inconsistent regarding whether a doctor’s note should be requested to validate the duration of disability income for mortgage applicants.” The bank questioned the fairness of the outcome, adding that “HUD determined this policy is in compliance for its loans, yet suggests it somehow violates the Fair Housing Act for non-HUD loans”[2].

Do you think that lenders should be able to request a doctor’s note to verify disability income and duration?

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Carole Ellis is editor in chief of the Bryan Ellis Investing Letter. Under Carole’s leadership, the Bryan Ellis Investing Letter has grown to over 700,000 subscribers, making it one of the largest real estate newsletters in the world. Each day, Carole directly impacts the daily thinking and conversations of real estate investors worldwide by providing thought-provoking analysis and commentary on news topics relevant to serious real estate investors.

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Carole makes her home in Kennesaw, Georgia with her husband Bryan and 4 children.

Comments (4)

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  1. TW says:

    Yes I believe they should. Otherwise, you will get individuals out their claiming disability when they are actually not disable and this should be for all types of loans including VA’s. This also keeps doctors honest and unable to take money under the table. Doctors have relatives they can lie for too. But the information has to be limited and the banks do not need to know the reason for disablement all they have to know is that the person is unable to work and note if it is temporary or permanent. Also, the patient should have a current letter from the disability office that has the same information so records are matching one another to prevent fraud.

  2. TM Barnes says:

    Yes and No, I have a disability letter and a VA entitlement certificate, and I still cannot get a home or a mortgage loan.

  3. simone hardy says:

    I don’t think the way they handled is fair. As long as they have an official letter proving that they
    are infact disabled, that should sufficient.

    • Brent T says:

      The issue, as I understand it, wasn’t only whether or not they were disabled, but also whether it was a short term disability or long term. In other words, will this income stream continue, allowing the homeowner to continue paying the mortgage, or will it cease in a few months so they are likely to default. It is important information for a lender to know (not specific medical details, but the duration of the disability payments) so they don’t get more foreclosures, which hurt everyone. It is important enough that HUD wants the information for their loans (a government agency that helps lower income loans), why not non-HUD loans??? It isn’t about the disability, it’s about “can this person afford this house?”

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