GUEST POST: Stop HAMP Discrimination Against the Disabled and the Elderly
Stop HAMP Discrimination Against the Disabled and the Elderly
By Rick Rogers, JD/MBA
Discrimination under HAMP is blatant. Here’s how it works:
An able-bodied, young man earning gross income of $2,000 per month, can qualify for a HAMP modification with house payments of only $620 per month.
A Disabled American Veteran “DAV” on a pension, or a 70-year-old retiree on social security, with the same gross income of $2,000 per month could also qualify for a HAMP modification, but house payments would be $775 per month.
The difference is $1,860 per year, nearly a full month’s wages. In this example, as in most cases, the difference is equal to three extra house payments each year (3 x $620 = $1,860) for the DAV or retiree.
When HAMP was introduced in 2009, it defined an “affordable house payment” as 31% of the borrower’s gross income. Later, new rules were added to increase house payments to 39% of gross income for those receiving pension or social security income. The group impacted by the new policy consisted almost exclusively of the disabled, the physically and mentally handicapped, and those over 60 years old.
If one was trying to justify the HAMP rule change, he might point to higher “take home” pay of those on social security or a pension, because recipients don’t pay income taxes. That rationale is defective because wage earning homeowners who earn the same as typical retirees or pensioneers, also don’t pay income taxes. There is little difference in take home pay between typical retirees and wage earners at the same gross pay level.
Retirees and the handicapped also experience higher living expenses, including home maintenance, spiraling healthcare costs, utilities, and other expenses associated with age, disability, and/or deteriorating health. That fact progressively reduces their disposable income and ability to make mortgage payments.
In the past, some mortgage lenders used a similar policy whereby they would increase a retiree’s gross income by an imaginary 25% when qualifying her for a loan. That would allow the bank to lend the retiree more money and, theoretically, stay within its lending guidelines. The key difference is borrowers had a choice of accepting or rejecting the bank’s loan offer. The “optional” feature of that lending program made it a benefit to borrowers, rather than a penalty. Under HAMP, borrowers have no option, and the rule serves only as a penalty; a sizable penalty.
This article is a call to stop the discrimination and to give the elderly and handicapped homeowners a fair and even chance to keep their homes.
The Equal Credit Opportunity Act “ECOA” and the Fair Housing Act “FHAct” prohibit mortgage lending discrimination based on age or handicap. It’s astounding that HAMP mandates discrimination against these protected classes in the face of these Acts.
This must be changed.
About the Author: Rick Rogers, JD/MBA is Executive Director of the Rogers Law Group, a Chicago area Law Firm dedicated exclusively to Home Preservation. For the last 10 years, his practice has been devoted to foreclosure, mortgage default, and related matters. He may be contacted at firstname.lastname@example.org or through www.therogerslawgroup.com .