Lenders ask for a lot these days when people apply for a mortgage, which is why it’s not unusual for a loan application to be 300 to 500 pages long. It’s enough to make anyone’s head spin.

But there are some things lenders are not allowed to ask of the roughly 15 million people who are disabled and receive disability income from the Social Security Administration.

For instance, a lender shouldn’t ask such borrowers about the nature of their disabilities or try to pry information loose from their doctors. Regulators have been pressing that point for several years, yet there continues to be a steady stream of this type of discrimination, they say.

Just this month, American Bank of Rockville, Md. agreed to pay $25,000 to a South Dakota couple after the husband (whose name was redacted from court records) accused the bank of asking him to prove that he would continue receiving disability income for at least three years when he refinanced his mortgage.

The bank even asked his doctor about the status of his condition, and whether it would improve, according to the complaint, filed with an administrative court at the Department of Housing and Urban Development. The bank denied all the charges, but according to the court document, settled the case to avoid costs and hassles. 

“Holding home buyers with disabilities to a higher standard is against the law,” Gustavo Velasquez, HUD’s assistant secretary for fair housing and equal opportunity, said in a statement.

The bank insisted that it was only trying to verify income, a crucial part of the lending process — not to discriminate against the borrower. Burned by the housing bust, the industry has been more carefully scrutinizing potential borrowers and demanding more documents on just about everything.

But there’s a line that shouldn’t be crossed, which is why the Consumer Financial Protection Bureau provided some guidance to lenders on the topic this week. Since the mortgage market is currently dominated by government-backed loans, what the regulators have to say about this issue matters more than ever.

It wouldn’t hurt for consumers to understand the basics too.

It comes down to this: Borrowers must provide written proof that they are receiving the disability income and disclose how much they’re receiving. But the lenders shouldn’t be asking for much beyond that.

Under its rules, HUD bars the lenders it works with from asking borrowers for documents about their medical conditions when they apply for mortgages insured by the Federal Housing Administration. For loans backed by the Veterans Administration, lenders do not need to get anything from a borrower’s doctor about how long the borrower’s medical condition will last.

Even though a relatively new rule requires lenders to verify a borrower’s ability to repay some low risk mortgages, that doesn’t mean that the lenders need to dig for more information on how long a borrower’s disability benefits will last, the CFPB said. The lenders should treat the benefits as likely to continue unless the Social Security Administration indicates otherwise in its letter verifying the disabled person’s income.

The Social Security Administration generally does not provide anything in writing that guarantees how long the benefits will last. After all, who knows? The person receiving the benefits could win the lottery tomorrow and strike it rich, in which case, he or she wouldn’t be eligible for the disability income.

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