An applicant's $2,100 monthly income is entirely from public assistance and disability payments, both documented as continuing for at least 3 years. May the lender exclude or discount the documented income solely because it comes from public assistance?
Correct Answer
B) No: evaluate the income individually rather than exclude it solely because it is public assistance
B. Public-assistance status alone does not justify exclusion or a haircut. Evaluate actual amount, reliability and expected continuation, not stereotypes about benefit recipients. Scope and exceptions: Three years is a scenario fact, not a universal Regulation B eligibility rule. This answer does not establish overall approval or that all disability payments are public assistance. Source: Section 1002.6(b)(2), (b)(5) and commentary — https://www.consumerfinance.gov/rules-policy/regulations/1002/6/
Why This Is the Correct Answer
B. Public-assistance status alone does not justify exclusion or a haircut. Evaluate actual amount, reliability and expected continuation, not stereotypes about benefit recipients. Scope and exceptions: Three years is a scenario fact, not a universal Regulation B eligibility rule. This answer does not establish overall approval or that all disability payments are public assistance.
Why the Other Options Are Wrong
Option A: It counts only where a co-applicant contributes employment income
Employment income from another applicant is not a prerequisite merely because these funds are benefits.
Option C: It may be excluded, as public assistance is not earned income
Unearned does not mean unusable.
Option D: It may be discounted by 25%, as public assistance is less reliable
The stated 25% reduction rests on a blanket assumption, not individual evidence.
Exam Tip
Evaluate the applicant’s evidence, not a benefit-recipient stereotype.
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