Proceeds of a property sale in the form of a trust deed, promissory note, or mortgage
continue to be evaluated as a “home.” Therefore, the proceeds are excluded after a
home is purchased as long as all payments from the negotiable instrument (including the principal and interest) are applied on the balance due on the home
or for the cost of necessary repairs, moving expenses, or necessary furnishings. The
term “balance due”, as used in this exclusion, is limited to principal and interest
payments on the home. If the payments from the negotiable instrument are not all used
to apply to the balance due on the current home, the instrument is a countable resource,
the market value of which is applied to the dollar maximum.
NOTE: If, under this provision of the State Plan, a trust deed (or other negotiable instrument)
is excluded as a resource, the interest portion of the payment received by the recipient
is countable income. The portion of the payment received that is principal is not
income (it is resources).
Example: Brenda Corriveau is a recipient converted by California. During a redetermination,
the SSA field office (FO) learns that Brenda owns a trust deed with a face value of
$25,000 and from which Brenda receives a monthly payment of $225. The FO learns that
Brenda sold some property and is using the payment from the trust deed to pay the
mortgage note on Brenda's current home. The mortgage payment on the current home is
$230. As the payment from the trust deed is all applied to the balance due on the
current home, the trust deed is an excludable resource. The FO also learns that, of
the $225 payment, $125 is principal and $100 is interest. In this instance, the recipient
has $100 countable unearned income.
Example: Tony Roberts, converted by California, decides to sell ,Tony's home in San Francisco
and buy another in Walnut Creek. Tony sells the home and receives $5000 cash and a
trust deed with a face value of $15,000. Tony receives a monthly payment on the trust
deed of $175, of which $100 is interest and $75 is principal. Tony buys a home in
Walnut Creek, paying $5000 down with a monthly mortgage (principal and interest only)
payment of $190. As all of the payments received from the trust deed are being applied
to the balance due on the second home, the trust deed is excludable as a countable
resource under the State Plan. The $100 interest portion of the payment is, however,
countable unearned income.
Mark Sarabia, converted by California, completes a redetermination during which the
FO learns Mark holds a trust deed that generates monthly payments to Mark of $236.
Mark's month principal and interest payment on the home in which Mark now resides
is $175. Mark does not apply the excess payment from the trust deed to the balance
due on Mark's current home. In this instance, the trust deed cannot be excluded as
a countable resource under the State Plan because not all of the payments derived
from the trust deed are applied to the balance due on the current home. The market
value of the trust deed will have to be determined and the value so established is
a countable resource. In addition, the FO will have to determine how much of the $236
payment is interest, as the interest is countable unearned income.