Food Stamps

1115.015.25 Loans

IM-#81 August 31, 2006

Exclude loans (Type UI – Source BF) from countable income as follows.

  • Bona fide loans: A loan is bona fide if:
    • it is supported by a written agreement to repay within a specified time or received from an individual or establishment engaged in the business of making loans; or
    • there is an obligation to repay (with or without interest); or
    • there is a pledge of real or personal property or anticipated income with the intent to repay when funds become available or future anticipated income is received; or
    • there is a written timetable and plan for repayment.

    NOTE: Do not confuse loans with advances on income which are counted as income when received. Also, the availability of a credit card or open-ended bank account is not considered in determining income for the EU.

  • Home equity conversion loans or plans allow EUs to borrow money or receive payments against the value of their home.
    • Reverse Annuity Mortgage Loan (RAM): Under this plan, the EU borrows money against the value of the home. They receive monthly payments (less interest and fees) for a certain period of time, such as ten years. The mortgage holder holds a lien on the property until repayment is completed. Repayment occurs when: (1) the house is sold; (2) the owners no longer occupy the house; or (3) the owners die and repayment is taken from estate settlement. Treat money received from RAM as a loan and exclude it from income.
    • Home Equity Conversion Sale Leaseback Program: Under this plan, an investor purchases the home from the homeowner, pays the purchase price in a series of payments, and gives the homeowner a lease for life or until the homeowner voluntarily secedes occupancy of the property as his/her residence. The purchase price is based on the homeowner’s equity in the home at the time of the sale. The property is leased back to the homeowner at or below the going market rate. The sale leaseback agreement also provides lifetime income to the former homeowner. Send sale leaseback agreements to State Office for evaluation. Whether proceeds from the sale of the property is considered income depends on the particular terms of the sales agreement.
  • Exclude all educational loans. (Type ED – Source NA or N4)

If a loan is not a bona-fide loan, enter the income source code as a non-bona fide loan (Type UI – Source NB). FAMIS includes this as unearned income.