How must a lender treat income from public assistance?

When assessing the treatment of income from public assistance, it is important to recognize that this type of income must be considered in the context of a borrower's overall financial profile. Income from public assistance can be a crucial part of a borrower’s financial resources, and while it may not always be used for underwriting purposes—such as qualifying for a loan—it still provides a complete picture of the borrower's financial situation and stability.

Considering public assistance helps lenders understand a borrower's capacity to meet mortgage payments. It may also show patterns of reliability or continued support. Although lenders may not rely solely on this income for qualifying purposes, dismissing it entirely would ignore a significant aspect of the borrower's financial circumstances. Therefore, it is necessary to consider this income when evaluating the borrower’s application and overall ability to manage and sustain their mortgage payments effectively.

This approach aligns with the spirit of fair lending practices, ensuring that all potential sources of income are acknowledged, which can play a pivotal role in enabling borrowers to obtain financing that they might not otherwise qualify for without taking public assistance into account.