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Justin Fitzhugh

We Need a Letter from your Doctor: Fifth Third to Pay $1.5 Million for Mortgage Application Denial

Thursday, August 14, 2014 - Article by: Justin Fitzhugh - Nations Lending Corporation - Message

Last Thursday, August 7th, 2014, the US Department of Justice, DOJ, reached a settlement with Fifth Third Mortgage Company to resolve allegations of discrimination on the basis of disability and receipt of public assistance. To prevent Fair Housing Act and Equal Credit Opportunity violation charges, the company agreed to pay $1.5 million to compensate victims, as well as to maintain revised policies and train underwriters and loan officers on the nuances of FHA and ECOA.

BACKGROUND

The complainant couple applied for an FHA-insured refinance loan on July 2010 with Third Fifth Mortgage through Cranbrook Mortgage Broker. The application was underwritten through Fannie Maes Desktop Underwriter, using FHAs TOTAL Scorecard. Soon after, the company issued a notice of approval stipulating the condition it purchase the loan only if the applicants provided evidence they would continue to receive Social Security Disability Income, SSDI.

The applicants were able to submit a statement from the Social Security Administration, SSA, but the loan officer asked the applicants to get a letter from their doctor stating their condition would merit three years of SSDI. When the applicants stated they could not get such letter form the doctor, the loan officer prompted the applicant to go to an urgent care facility to get such statement.

A few days after the applicant faxed SSA documents, he reached out to the loan officer and asserted their request for a doctors letter was unfair, unreasonable, and prejudicial. He then demanded the loan be approved or denied, and in the case of denial, the company state in writing the reason for this decision. Cranbrook Mortgage issued a notice of denial stating the company was unable to verify income.

The applicants filed a complaint with the US Department of Housing and Development, HUD. Fifth Third Mortgage fully cooperated during the investigation.

At the time of this application, FHA underwriting guidelines required lenders to show a borrowers income was expected to continue for at least three years, but it did not require a doctors letter nor medical evidence to verify the continuance of the borrowers disability. The FHA Handbook states SSID must be verified by the SSA or from Federal tax returns. If any benefits expire within the first full three years of the loan, the income may only be considered as a compensating factor. However, the Fifth Third FHA Lending Manual required borrowers receiving disability-related income to verify three years of income continuance by either a statement of the physician, statement from the insurance company, or a copy of award letter or distribution letter including income and continuance.

The settlement was filed in Macon, Georgia, and is subject to approval. U.S Attorney Michael J. Moore, Middle District of Georgia, said A persons medical information is often some of the most personal information in and about their life.

In the last few weeks I have written post about maternity leave discrimination, and same sex discrimination. The outcome of this case clearly shows we better follow the rules. I wonder about the amount of the loan Fifth Third denied, and how it compares to the $1.5 million settlement.

1) http://www.justice.gov/opa/pr/2014/August/14-crt-834.html

2) http://portal.hud.gov/hudportal/documents/huddoc?id=13HUD_v_Fifth_Third_Bank.pdf#page=3

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