You have asked whether a promissory note from a Supplemental Security Income (SSI)
recipient to her parents that purports to secure a mortgage on non-home real property
shows a valid second mortgage that would reduce the equity value of the property for
SSI resource purposes.
The promissory note does not establish a valid second mortgage on the non-home real
property for SSI resource purposes.
The Social Security Administration (SSA) found that C~ (Recipient) was entitled to
SSI beginning in March 2015. She is the sole owner of non-home real property located
in H~, Florida. Recipient has a first mortgage on the property with a balance of $43,693.61
as of September 2015. The county property appraiser estimated the property’s value
in 2015 was $50,368.00.
After Recipient reported her ownership of the property to SSA in September 2015, SSA
sent notices advising her that she was no longer eligible for SSI. On November XX,
2015, Recipient executed a promissory note to her parents. The note purports to obligate
Recipient to repay her parents $50,000.00 for personal loans they made commencing
July XX, 2002. The promissory note states it “is secured by a second mortgage on real
estate, of even date herewith,” but does not identify the property. Recipient provided
no separate mortgage document with the promissory note.
SSI is a general public assistance program for aged, blind, or disabled individuals
who meet certain income and resource restrictions and other eligibility requirements.
See Social Security Act (Act) §§ 1602, 1611(a); 20 C.F.R. §§ 416.110, 416.202 (2015).
 “Resources” include cash or other liquid assets or any real or personal property
that an individual owns and could convert to cash to use for his or her support and
maintenance. See Act § 1613; 20 C.F.R. § 416.1201(a). “The general expectation is that individuals
or couples whose resources exceed the applicable limit will use the excess to meet
their needs before becoming eligible for SSI benefits.” Program Operations Manual
System (POMS) SI 01110.001A.
Not every asset a person owns is a resource. See POMS SI 01110.001B.2. The Act specifically excludes from resources an SSI recipient’s home and its land.
See Act § 1613(a)(1); 20 C.F.R. § 416.1212. However, for real property to qualify as
a recipient’s excluded home, the recipient must have an ownership interest in the
property and use it as his or her principal place of residence. See 20 C.F.R. § 416.1212(a); POMS SI 01130.100A. The information provided does not indicate the real property at issue meets the definition
of an excluded home under the Act because it is not Recipient’s principal residence.
Real property that a recipient owns but that does not otherwise meet the definition
of an excluded home under the Act is considered “non-home real property.” See POMS SI
01140.100A. Non-home real property is a potential resource for SSI purposes. See 20 C.F.R. § 416.1201(a); POMS SI 01140.100B. Non-home real property is assumed to be a nonliquid asset. See 20 C.F.R. § 416.1201(c)(1); POMS SI 01110.310B.1. When a recipient alleges that there is an encumbrance against non-home real property,
and the encumbrance could affect SSI eligibility, the property’s equity value determines
whether it is a resource for SSI purposes. See POMS SI 01140.100B, D.1; see also 20 C.F.R. § 416.1201(c)(1) (stating: “Nonliquid resources are evaluated according
to their equity value except as otherwise provided”).
Equity value includes encumbrances, such as mortgages, and is measured against the
current market value (CMV) of the property. See POMS SI 01140.100D.1.-2. A beneficiary alleging negative equity due to a mortgage must provide suitable
evidence establishing the mortgage’s existence, amount due, and scheduled payments.
See POMS SI 01140.100D.2; see generally 20 C.F.R. § 416.200 (stating a beneficiary “must give us any information
we request and show us necessary documents or other evidence to prove that [she] meet[s]
As state law generally informs situations where varying property rights could affect
resource determinations, see, e.g., POMS SI 01120.220B.1 (noting that loan agreements must be enforceable under state law), Florida law
governs the answer to whether the promissory note evidences a valid mortgage encumbering
Recipient’s non-home real property. Generally, all “instruments of writing conveying
property or selling property . . . for the purpose or with the intention of securing
the payment of money” are mortgages under Florida law. Fla. Stat. Ann. § 697.01(1)
(West 2015). Stated another way, “Whenever property belonging to one person is held
by another as security for an indebtedness of the other, the transaction is in effect
a mortgage.” Kirkland v. Miller, 702 So. 2d 620, 621 (Fla. Dist. Ct. App. 1997) (internal
quotation marks omitted). Thus, a mortgage can be evidenced by a promise to pay, as
Recipient provided here. See, e.g., Deutsche Bank Nat. Trust Co. v. Clarke, 87 So.
3d 58, 62 (Fla. Dist. Ct. App. 2012) (stating that Florida law does not require “production
of the mortgage in addition to the note” because the “mortgage itself is a mere incident
to the note”).
In this case, the promissory note does not show a contractually sound second mortgage
on the property. Mortgages, like other contracts, must be supported by consideration.
See United States v. Morrison, 28 So. 3d 94, 99 (Fla. Dist. Ct. App. 2009). “Consideration”
is a legal term requiring parties to agree to a new obligation or forego a right in
order to make an enforceable contract. See, e.g., Cintas Corp. No. 2 v. Schwalier, 901 So. 2d 307, 309 (Fla. Dist. Ct. App. 2005) (stating
that “[a] promise, no matter how slight, qualifies as consideration if the promisor
agrees to do something that he or she is not already obligated to do.”); Uwanawich v. Gaudini, 334 So. 2d 116, 118 (Fla. Dist. Ct. App. 1976) (indicating that “where a party has
a bona fide belief that he has a legal right, a forbearance to enforce that right
may be consideration for a new agreement”). Here, Recipient’s parents apparently tracked
personal loans they claim to have made to Recipient since 2002, indicating that they
expected repayment for these prior amounts. The promissory note was based purportedly
on these pre-existing debts owed to her parents. The mortgage therefore wants for
consideration, as Recipient’s parents did not part with anything of value or forego
an existing right at the time the promissory note was executed, and are actually in
a better position than before the execution of the promissory note. See, e.g., Gabel v. Drewrys Ltd., U.S.A., Inc., 68 So. 2d 372, 375 (Fla. 1953) (discussing a lack of consideration for a mortgage
where the mortgagee was in a better position after execution of the mortgage). Furthermore,
it appears that Recipient and her parents executed the promissory note for the sole
purpose of avoiding SSI resource limits. This arrangement is generally insufficient
consideration for a mortgage. See, e.g., Chaykin v. Kant, 327 So. 2d 793, 794 (Fla. Dist. Ct. App. 1976) (finding a mortgage executed just
to defeat an Internal Revenue Service tax lien was wanting for consideration). Recipient
and her parents therefore did not create a valid second mortgage on the non-home real
The promissory note is also not a valid mortgage under Florida law because it does
not describe the non-home real property in question. The promissory note instead purports
to be “secured by a second mortgage on real estate, of even date” with the promissory
note. The promissory note, on its own, is therefore ineffective to create a mortgage
because the “land intended to be mortgaged cannot be identified because of a lack
of description. . . .” Air Flow Heating & Air Conditioning, Inc. v. Baker, 326 So. 2d 449, 451 (Fla. Dist. Ct. App. 1976) (citing Fla. Bank & Trust Co. of West Palm Beach v. Ocean & Lake Realty Co., 160 So. 1 (Fla. 1935)). While mortgage documents may refer to other documents particularly
identifying the land, those other cross-referenced documents must be specific in identifying
the mortgaged property. See Gradolph v. Ricou, 139 So. 579, 580-81 (Fla. 1932). As Recipient did not provide the mortgage contract
purportedly executed with the promissory note, the latter’s reference to the former
is insufficient to determine if there is adequate identification of the property to
be mortgaged. Accordingly, Recipient has failed to provide sufficient evidence of
an effective mortgage against the non-home real property in question.
The promissory note is insufficient to create a mortgage that reduces the equity value
of Recipient’s non-home real property for SSI resource purposes.
Mary Ann Sloan
Regional Chief Counsel, Region IV
By: Jeffrey S. Wilson
Assistant Regional Counsel