Foreclosure Guidance Provided

Empire Justice July 15, 2013

Millions of homeowners are still struggling to avoid foreclosure. Added to the stress of refinancing, or worse yet, moving out of one’s home after foreclosure, are questions about how the foreclosure or move might affect a client’s continued receipt of SSI benefits. Is the home still an excluded resource? Will it be counted as a resource if the client has to move? Will the client be charged with the dreaded ISM (in-kind support and maintenance) if he or she continues to live in the property but is no longer making payments on the mortgage?

SSA has provided guidance to it adjudicators on some of these issues. AM (Administrative Message) 09060 was issued on April 17, 2009, with a retention date of July 8, 2013. The AM acknowledges that there are no specific POMS relating to foreclosures. It references existing POMS on living arrangements and resources in addressing a series of hypothetical foreclosure situations.

Overall, SSA’s answers to the hypothetical scenarios are helpful. For example, a home might be treated as a resource if foreclosure proceedings have begun and the SSI beneficiary has moved out. If, however, the SSI beneficiary is “under water,” in that the current market value (CMV) of the home is less than the beneficiary owes the lender, eligibility for SSI would not be affected. Similarly, after a foreclosure is completed, it is assumed that the claimant validly transferred the property for fair market value (FMV); there is no ineligibility due to the transfer.

In terms of ISM, the AM provides that until a foreclosure is final, the claimant retains an interest in the property and an obligation to pay the mortgage, even if not currently doing so. SSA will not charge with the claimant with ISM due to nonpayment. What if the foreclosure is final, but the claimant is no longer obligated to pay the mortgage and has been given a date by which s/he must vacate the home? Even if the mortgage company does not require payment during this period, ISM will not be charged.

AM-09060 is available on the on-line resource center as DAP #555.