Month: August 2023

Apache is functioning normally

The average U.S. mortgage rate for a 30-year fixed loan is 2.87% this week, dropping one basis point from last week’s 2.88%, Freddie Mac said in a report on Thursday. The rate is now one basis point from an all-time low set in mid-September.

The average fixed rate for a 15-year mortgage was 2.37%, rising one basis point from last week’s 2.36%, the mortgage securitizer said.

Mortgage rates that have stayed below 3% for 11 consecutive weeks have boosted housing demand, acting as a counter-weight for an economy that is struggling amid the worst public health crisis in more than a century.

“With near-record-low rates, buyer demand remains robust with strong first-time buyers coming into the market,” said Sam Khater, Freddie Mac’s chief economist. “The demand is particularly strong in more affordable regions of the country such as the Midwest, where home prices are accelerating at the highest rates over the last two decades.”

Sales of existing homes rose to a 14-year high of six million at an annualized pace in August, the National Association of Realtors said in a report last month.

Combined sales of single-family houses, townhomes, condominiums and cooperatively owned apartments rose 2.4% from July, according to the report. Compared to a year ago, prior to the COVID-19 pandemic, August’s sales were 11% higher, NAR said.

“The buyers are coming in because of the low interest rates – that’s the number 1 reason,” said Lawrence Yun, NAR’s chief economist.

The low rates are also putting upward pressure on home prices, because cheaper financing typically means borrowers qualify for bigger mortgages and can bid higher for properties they want. The median existing-home price in August was $310,600, up 11.4%, and prices rose in every region, NAR said.

The boost in demand that comes from the low rates have worsened an inventory shortage that plagued the market long before the pandemic hit the U.S.

The number of homes on the market at the end of August totaled 1.49 million, down 18.6% year-over-year, the NAR report said.

Unsold inventory measured as a “months supply” number that gauges how long it would take to sell all the homes if nothing else came on the market, was three months, NAR said. That’s down from 3.1 months in July and compared with four months a year ago.

Source: housingwire.com

Apache is functioning normally

The economic picture keeps changing, and so does the outlook for mortgage rates.

As recently as June, many experts expected the U.S. economy to fall into recession this year, and mortgage rates to dip back into the 5 percent range.

The economic reality has played out much differently. Mortgage rates are still close to 7 percent, and with the Federal Reserve resuming rate hikes at its July 26 meeting, housing economists expect them to hold steady for now — that is, rates might move up or down slightly, but they’re unlikely to fall substantially.

“I do not see much change from the current 6.5 percent to 7 percent range in August,” says Lawrence Yun, chief economist at the National Association of Realtors.

The primary driver of mortgage rates this month: inflation, and anticipation of how the central bank will react to the price picture.

What happened to mortgage rates last month

Mortgage rates were quite volatile in 2022, surging past 7 percent far faster than anyone predicted. They calmed some in 2023, with the average rate on a 30-year fixed loan at 6.95 percent as of July 5, according to Bankrate’s weekly national survey of lenders. Rates bounced around a bit throughout the month but barely changed overall, reaching 6.98 percent in the final survey taken in July.

Not long ago, mortgage experts were calling for rates to fall all the way to the low-5 percent range this year. Instead, the resilient economy means mortgage rates have held strong.

“Mortgage rates are remaining above levels we anticipated earlier this year as inflation pressure has persisted and consumer spending remains robust,” says Selma Hepp, chief economist at CoreLogic, a real estate data and analytics firm.

At the point where core inflation gets better, mortgage rates will too.
— Greg McBride, Bankrate chief financial analyst

The driver rate watchers are looking at now

The major factor moving mortgage rates is inflation, and what the Federal Reserve will do at its September meeting.

In June, the official inflation rate cooled to 3 percent. That was well below the 2022 peak of 9.1 percent, but it’s still above the Fed’s official target of 2 percent. As a result, the Fed resumed rate increases at its meeting in July.

“If inflation data show that price pressures are easing, particularly at the core level, that will keep a lid on mortgage rates,” says Greg McBride, Bankrate’s chief financial analyst. “But without that, there just isn’t much of a catalyst for any meaningful pullback in mortgage rates when the economy is doing well enough to warrant more Fed rate hikes.”

While the Fed doesn’t directly control mortgage rates, its moves set the overall tone for borrowing costs. In his July 26 news conference, Fed Chairman Jerome Powell said further rate increases are a possibility. “We’re prepared to further tighten if that is appropriate,” Powell told reporters.

Like Powell, Yun will pay close attention to the Consumer Price Index (CPI) reports scheduled for release in early August and early September.

“The next Fed meeting occurs after two months of CPI figures,” says Yun. “Much calmer inflation will stop the Fed from raising rates, with hints of a rate cut next year.”

Yun sees mortgage rates falling to 6 percent by the end of 2023 — a view shared by Bob Broeksmit, president and CEO of the Mortgage Bankers Association.

“Rates will remain volatile in the coming months but will fall to around 6 percent by the end of this year,” says Broeksmit.

Another wildcard is the overall angst among investors and lenders — uncertainty that is showing up in the gap between 30-year mortgage rates and their closest proxy, the 10-year Treasury yield.

This interval, known to economists as “the spread,” typically runs between 1.5 and 2 percentage points. If the 10-year yield sits at 4 percent, for example, the 30-year fixed mortgage rate should track close to 6 percent.

However, the spread has jumped to more than 3 percentage points — the highest level since the scary days of 2009, according to Bankrate research.

What the rate picture means for homebuyers, sellers

While the housing market has cooled in recent months, a crash doesn’t seem imminent.

Instead, home prices have held steady as demand for properties continues to outpace the supply of homes for sale. The National Association of Realtors says the median home price in June topped $410,000, the second-highest monthly reading on record.

That’s good news for sellers, not so good for buyers. Buyers have little choice but to accept the market’s new reality. Mortgage rates are unlikely to fall, says Erin Sykes, chief economist at Nest Seekers International, a real estate brokerage.

“I expect mortgage rates to more or less stay stable though the rest of the year,” says Sykes. “Watching rates on a daily basis is like waiting for a pot to boil. Small adjustments in rates should not affect your motivation to purchase a home.”

Source: bankrate.com

Apache is functioning normally

Update: Carrington Mortgage Services now allows FICO scores as low as 500 for both FHA loans and VA loans, which is the minimum credit score for an FHA loan.

Recently, there has been plenty of moaning and groaning about the mortgage “credit box” being too tight.

In a nutshell, banks and lenders have been accused of becoming too conservative, making it difficult for less creditworthy borrowers to obtain financing.

But as home loan lending volume continues to plummet, the obvious “solution” is to expand offerings, namely, by easing guidelines.  That, after all, is the easiest way to increase your customer base in the mortgage biz.

Carrington Plans to Serve the Underserved with Brokers

For all intents and purposes, a 550 FICO score is pretty abysmal. In order for your credit score to sink that low you must have done something seriously wrong.

Typically, it means missing a payment or three, whether just a credit card payment or a more major offense, such as a mortgage payment.

Regardless, Santa Ana, CA-based Carrington Mortgage announced today that it would now accept FHA loan applicants with FICO scores as low as 550, down from their prior floor of 580.

Perhaps there isn’t too much of a difference between a 550 and 580 score, but it’s still telling about the direction the mortgage industry is moving in.

With less business to go around, those determined to stay in the game are getting more creative. Whether it’s a full-blown return to subprime lending remains to be seen, but it’s certainly a hint of the past.

For the record, Carrington also lowered the minimum FICO score for VA loans and USDA loans to 550 from 580.

The pricing adjustment for a credit score that low is 2.75, according to a Carrington ratesheet. That will lead to higher closing costs and/or a higher mortgage rate.

But it still provides a source of financing for previously shutout homeowners.

Interestingly, the company plans to eliminate both conventional and jumbo loans from their wholesale product line effective April 1st.

So it appears as if Carrington wants to be the destination of choice for mortgage brokers to send their low-FICO gov loans, ostensibly because they’ll know how best to handle them.

Wells Fargo Used to Be Okay with Even Lower Scores

While 550 sounds pretty darn low, back in 2011 Wells Fargo offered FHA loans with scores as low as 500 following pressure from HUD to loosen up.

However, applicants needed down payments of at least 10% and DTI ratios couldn’t exceed 31%, a combination that was probably pretty rare.

Long story short, most individuals with really poor credit tend to not to have lots of income or assets at their disposal.

And I think that guideline was pretty short-lived because Wells just announced it was lowering its minimum credit score for FHA loans to 600 from 640.

However, I believe that allows for a down payment as low as 3.5%, which is much lower than the 10% requirement for all FHA loans with credit scores below 580.

To sum it up, lenders are coming to terms with reality and easing guidelines. It may not be 2006-2007 just yet, but if volume continues to drop, lenders will need to get increasingly creative if they want to stick around.

Further proof of this loosening is evident in the latest Origination Insight Report from Ellie Mae, which revealed that 33% of closed loans in February had a FICO score south of 700, compared to just 24% a year earlier.

Additionally, the average FICO score for a closed loan was 724 in February, which while still relatively solid, was down from 745 a year ago.

Read more: Getting a mortgage with a low FICO score.

Source: thetruthaboutmortgage.com

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A short supply of homes for sale is a contributing factor to buyers’ dampened spirits.


Joe Raedle/Getty Images

Anyone looking to venture into the housing market got whacked with another jump in mortgage rates last week. That means a return to any semblance of housing affordability is a long shot for now.

Mortgage rates’ recent run-up in tandem with the 10-year Treasury yield is one reason why home affordability has again become a hot topic. Economists and analysts frequently talk about affordability, but there’s no one central way of measuring it. Most measures take home prices, mortgage rates, and median incomes into consideration.

The hurdles to homeownership presented by housing costs relative to income was a topic of conversation even before the pandemic, but buying a house back then looks downright pleasant in hindsight. “For home affordability to return to pre-pandemic levels, mortgage rates must fall to 4%, incomes must rise quickly by 30%, and home prices must drop by 30%,” National Association of Realtors Chief Economist Lawrence Yun said in a statement to Barron’s. “All of these, individually and collectively, are unlikely scenarios.”

Home affordability indexes released by two separate trade groups earlier this month hit record or near-record lows in the second quarter, indicating a difficult environment for purchasing homes.

And this quarter doesn’t look promising: A weekly

Redfin

gauge tracking home sale prices on a rolling four-week basis has risen above year-ago levels for five straight weeks, while mortgage rates this past week hit their highest level in more than 20 years, according to

Freddie Mac
.

Buying a home was already difficult before mortgage rates’ ascent back above 7%. A record share of respondents to

Fannie Mae

‘s survey measuring housing market sentiment, 82%, said in July that it was a bad time to buy a house. “Unsurprisingly, consumers continue to attribute the challenging conditions to high home prices and unfavorable mortgage rates,” Fannie Mae chief economist Doug Duncan said in a statement.

Indeed, assuming a 20% down payment on a $400,000 home, the buyer of a home at last week’s average Freddie Mac mortgage rate would owe roughly $400 more a month than the same week last year.

Compared with 2019’s average rate, at just under 4%, such a buyer would owe $600 more. And that’s before accounting for the impact of rising prices, which as of May were about 46% higher than the same month in 2019, according to S&P CoreLogic Case-Shiller.

A short supply of homes for sale is likely a contributing factor to buyers’ dampened spirits: “Demand has been impacted by affordability headwinds, but low inventory remains the root cause of stalling home sales,” Sam Khater, Freddie Mac’s chief economist, said last week.

Such headwinds may have dented existing-home sales in July. Consensus estimates compiled by FactSet foresee previously owned homes having been sold at a seasonally-adjusted annual rate of roughly 4.14 million in July, down from 4.16 million in June. New home sales, a measure of contract signings to buy newly constructed homes, is expected to rise slightly, to 701,000. Data for both are expected on Tuesday and Wednesday, respectively.

Consensus estimates for August are not yet available, but leading data doesn’t paint a promising picture: a Mortgage Bankers Association index tracking the volume of applications for home loans has hovered less than 4% above record lows in the first two weeks of the month.

Unfavorable conditions in the for-sale market could push would-be buyers towards renting—particularly in southeastern markets where a large number of rental units are under construction, a team of

Goldman Sachs

analysts wrote in a note earlier this week. “While rental affordability is also challenging in absolute terms, the stark deterioration in mortgage affordability has made renting more compelling for potential homeowners,” they said.

With plenty to be pessimistic about when it comes to current home buying conditions, one must wonder: how bad can headwinds get from here? Affordability looks set to improve over the next few years, says CoreLogic chief economist Selma Hepp—even if it remains more difficult compared with prepandemic.

Hepp says she expects home prices to stagnate over the next several years, reducing some of the cost headwind, while new construction provides supply and wages increase. “We have now gone through the biggest shock of loss of affordability,” Hepp told Barron’s. “We’ve gone through the worst, and now it’s a matter of income growth” and readjusting home prices, she said.

Write to Shaina Mishkin at [email protected]

Source: barrons.com

Apache is functioning normally

Earlier this week, the National Association of Realtors sent a letter to FHA Commissioner Carol Galante urging her to rethink the agency’s new mortgage insurance structure.

Since 2011, annual mortgage insurance premiums have risen from 90 basis points to 135 basis points in an effort to shore up reserves at the FHA.

Additionally, many borrowers must now pay the annual MIP for the life of the loan, instead of having it fall off once the loan dips to an LTV of 78%.

As a result, NAR believes hundreds of thousands of renters are being priced out of the real estate market.

They estimate that anywhere between 125,000 and 375,000 potential home buyers now have nowhere to turn for financing, with conventional loans also too expensive thanks to PMI and higher interest rates relative to the FHA.

FHA Loan Payments Up 13% Since 2008

Even with a steady interest rate, FHA loan payments have risen markedly thanks to the new mortgage insurance structure.

On a $150,000 loan set at 4.5%, the monthly payment has increased from $834 to $942 over the past five years.

The fees alone on an FHA loan account for nearly 20% of the mortgage payment thanks to the rising annual MIP and an upfront premium that nearly doubled from 1% to 1.75%.

Despite these increases, FHA loans tend to be cheaper than conventional loans at high LTVs. So these borrowers are effectively priced out if they have little to put down on a home.

This is a problem because NAR notes that the FHA insured more than half of the purchase-money loans made to African Americans and Hispanics in 2012.

Many of those affected are also the youngest homeowners, who have experienced the slowest income growth in recent years.

NAR Wants a Rule Reversal

To offset this potential roadblock, NAR has recommended that the FHA lower annual mortgage insurance premiums and no longer require that they be paid for the life of the loan.

They believe this will slow prepayments of FHA loans, which has hurt the reserve fund of late.  Per HUD data, FHA prepayments were at their highest level in fiscal year 2013 since the end of fiscal year 2004.

And full payoffs with no subsequent refinance with the FHA accounted for 81% of the FHA’s prepayments.

Making the desired changes could keep borrowers with the FHA for a longer period of time and boost revenue.

Unfortunately, HUD made these very changes to their mortgage insurance structure to shore up reserves after capital levels fell below acceptable levels.

The FHA also grew far too much in recent years, and the changes they made could help usher in private capital, which has been the goal of policymakers for a while now.

Lastly, if FHA financing is still the cheapest game in town, it might be hard to convince them to change their ways.

Source: thetruthaboutmortgage.com

Apache is functioning normally

I have often found that where technology and financial services come together, the no’s are necessary. As such, shouldn’t we learn to make them happen productively? Saying no is an inevitability — or rather, it should be. Anyone who has tried to accommodate the ‘yes’s’ all the time could tell you that it is impossible to say yes to everything.

Those who try to say yes 100% of the time are often mistaken in thinking it’s working effectively for them and for those around them — even the parties they’re saying ‘yes’ to.

But, saying yes to everything removes us from the equation and renders our point of view immaterial. It makes our judgement about the effectiveness or outcomes moot.

The privilege of saying no

We should make saying ‘no’ a habit, but rather that the intuition, intelligence and experience that may lead us to consider ‘no’ as a viable conclusion are vital signals that we should not take for granted. The ability to bring these signals to bear involves first recognizing that as an option and then exercising it as an advantage — not only for us, but also on behalf of the people who are depending on us.

Capitalizing on the advantages of when to say ‘no’ can make the difference between good and great — between maintenance and breakthrough. Some of the best advice I ever received was when a former boss advised me to, “Say ‘no’ to the good, so you can say ‘yes’ to the best.” If you fill your plate with the “good,” then where is the time or room to take advantage of great opportunities that show up?

I heard another version of this advice when a coach commented on a personnel option he chose not to exercise: “Some of the best deals are the ones you don’t make.”

The boundaries of time

It becomes clearer where to set boundaries when we carefully consider our entire vision. Your end-goal is the guide that allows you to see what smaller goals lead toward, what challenges or actions may divert you away from it and what merely marks time.

Knowing what your “great” looks like can be a touchstone, a reference for when to agree to do something and when not to. While staying open to the unexpected, we can see opportunity in any development. The key is to keep our goals and vision in mind, and act distinctly.

Time is the ever-present resource on which we can exercise critical choices. Our calendars, schedules and agendas construct a gymnasium where purpose gains definition. Be deliberate in assigning time to the things that are most important to you and recognize that we must work on our business and not just in our business. This means apportioning time for analysis, strategy and evaluation.

If we only schedule operations and execution, then the business is running us. Therefore, we should make a point of scheduling the time to think — both alone and together.

The response you can expect

You may find it hard to practice saying no deliberately. If you’ve formed a habit of saying yes too often, it is easy to slip back into old patterns. The best way to overcome this sense of resistance is to stick with your plan and pay attention to what you’re getting in return.

Once you find that you have more time and energy to focus on what really matters to you, then the reward and value of saying no becomes more apparent.

Not everyone will understand when you say ‘no.’ This is not an obstacle, but rather a road sign. If everyone agrees with you, then it is unlikely that your decision is accomplishing anything worthwhile. Your options for dealing with this response can be yet another opportunity for progress.

Sometimes, explaining your decision can be a real opportunity to enhance the impact. It is vital that the timing and extent of your explanation isn’t seen as an apology or uncertainty. The risk of weakening your decision must be avoided, yet the chance to put the energy of understanding behind it can, on occasion, be worth taking.

Here, where technology and financial services come together, I have had the tremendous professional opportunity of seeing what works in real market situations, more or less immediately almost every day and I’m happy to share what I have learned.

Christy Soukhamneut is managing director of Mortgage Finance in Texas.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the views and opinions of Texas Capital Bank.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the author of this story:
Christy Soukhamneut at [email protected]

To contact the editor responsible for this story:
Sarah Wheeler at [email protected]

Source: housingwire.com

Apache is functioning normally

Apparently no company is exempt, not even ING, which remained relatively quiet over the past year as the mortgage crisis ravaged hundreds of other seemingly unbreakable financial institutions.

The Dutch Bank said today it expects to lose 3.3 billion euros in the fourth quarter as a result of bad mortgage bets, pushing the company to a 1 billion euro loss for all of 2008.

“In the fourth quarter market conditions deteriorated sharply, making it the worst quarter for equity and credit markets in over half a century,” the company said in a release.

ING also announced that it would cut 7,000 full-time positions in 2009, among other cost-cutting efforts, which should save the company more than one billion euros annually from 2010 onwards.

At the same time, the banking giant will receive government support for its souring home loan portfolio here in the United States (sorry Holland).

The bank has struck a deal with the Dutch government to provide a back-up facility for illiquid assets, namely a 27.7 billion euro portfolio of Alt-A mortgage securities held at ING Direct USA and ING Insurance Americas.

ING will remain the sole owner of the securities, but will only be exposed to 20 percent of the results on the portfolio, with the Dutch State entitled to the remainder, whether profits or losses.

“With this agreement, we take a firm stride to reduce the risks on our balance sheet,” said Jan Hommen, Chairman and CEO-designate of ING.  “We much appreciate the measures the Dutch government is taking in this phase to restore confidence in the financial sector and stimulate the economy and thank them for reaching this agreement.”

In late November, ING Direct said it would suspend foreclosure sales on owner-occupied properties through the end of March.

The American unit of the Dutch bank provides hybrid adjustable-rate mortgages and online savings accounts.

(photo: birdeyes)

Source: thetruthaboutmortgage.com

Apache is functioning normally

Last week, mortgage rates hit a 21st-century high, the 10-year yield closed slightly higher than my peak forecast for 2023, and housing inventory growth was still slow. Purchase application data didn’t budge much on the week-to-week data.

  • Weekly active listings rose by only 4,401.
  • Mortgage rates went from 7.19%% to 7.37%.
  • Purchase apps were flat week to week.

Weekly housing inventory

Mortgage rates have been near or above 7% for the last few months, and active listings growth has been slow during this tenure. I had anticipated active listings growth to be between 11,000 to 17,000 per week with rates this high, and it hasn’t happened. I will keep a close eye to see if the country can achieve some decent weekly active listings data before the seasonal decline in inventory. Last year, the seasonal decline took longer than usual, but 2022 was an abnormal year with mortgage rates. 

  • Weekly inventory change (August 11-August 18): Inventory rose from  492,140 to 496,541
  • Same week last year (August 12 – August 19): Inventory rose from 550,175 to 551,458
  • The inventory bottom for 2022 was 240,194
  • The inventory peak for 2023 so far is 496,541
  • For context, active listings for this week in 2015 were 1,211,841

As noted above, active listings have been negative year over year for some time now, and we are heading toward a seasonal decline. Will higher rates extend the inventory season, or are we going into the traditional seasonal decline?

The new listing data has been trending at the lowest levels ever for over 12 months now. Hopefully, we will have found a bottom in this data line before the year ends. This data line is very seasonal, and we’ve already started the seasonal decline. As long as we see an orderly drop toward the end of the year, I will be happy. The last thing we want to see is more sellers calling it quits faster than the current trend.

Here’s how new listings this week compare to the same week in past years:

  • 2023: 60,295
  • 2022: 68,167
  • 2021: 80,898

Mortgage rates and bond yields

It was a crazy week with mortgage rates as we hit a 21st-century high last week, with mortgage rates hitting 7.37%. To understand how I look at mortgage rates, the Fed, and the 10-year yield, I wrote this article last week to give a more detailed view. This topic was so “en vogue” this last week that CNBC asked me to open their Squawk Box show Friday morning to go over the issue. Here is the video clip of that interview.

With all that’s happening in the market, what should we focus on this week? For me, it’s straightforward — to see if we could break above 4.34% on the 10-year yield, which was the intraday high last year. The 10-year yield didn’t even touch 4.34% last week, and we closed the week at 4.25%.

Purchase application data

Purchase application data was flat last week, making the count year to date at 14 positive and 16 negative prints and 1 flat week. If we start from Nov. 9, 2022, it’s been 21 positive prints versus 16 negative prints and one flat week. While home sales aren’t collapsing like they were last year, they’re not growing with mortgage rates this high. Purchase apps are forward-looking for 30-90 days, which means home sales will be stuck near 23-year lows for the rest of the year.

The week ahead: Home sales and the fed

Next week, we have existing and new home sales reports. These two reports will show one big difference in 2023 compared to last year, new home sales are growing yearly while existing home sales still show negative year-over-year prints. This trend should continue this week.

As we head toward the end of the year, we have to remember that last year at this time, home sales were collapsing. So, the year-over-year declines will be less for existing home sales, and new home sales will show solid growth.

On August 25, we have the Federal Reserve’s meeting in Jackson Hole, which is very interesting. At this point of the cycle, higher rates aren’t something they want to see as they have stated they believe they’re in restrictive policy now. I will be curious to hear if Jay Powell admits that higher rates would not be something the Federal Reserve wants to see now. 

Source: housingwire.com

Apache is functioning normally

If you’ve already qualified for Social Security Disability Insurance (SSDI), you can earn up to $1,050 a month without triggering the income programs that could affect your benefits. If you’re still applying for benefits, you generally won’t qualify for disability if you make more than $1,470 a month ($2,460 if you’re blind)

.

The Social Security Administration (SSA) has several work incentive programs to help disability recipients continue working. These include a trial work period (TWP), where there’s no earnings limit for nine months, an extended period of eligibility (EPE), which allows you to earn under the SSA’s limit for 36 additional months, and a Ticket to Work program, which offers free employment services.

Here are the rules for SSDI and how to work part time without losing your disability benefits.

Rules for receiving disability benefits

  • You can still work part time and receive SSDI benefits if you don’t meet the SSA’s requirements for “gainful” employment, according to Aleyda Toruno, a Work Incentives Planning and Assistance (WIPA) coordinator with Disability Rights California.

  • The SSA uses earnings guidelines called substantial gainful activity (SGA) to determine whether someone’s disability qualifies them as needing additional benefits.

  • The SGA for 2023 is $1,470 per month ($2,460 if you’re blind), meaning that if you earn more than that, you likely won’t qualify for benefits.

  • “The rules for part-time work or return to work differ for a person who is still attempting to prove disability versus a person who has already been deemed disabled under Social Security’s programs,” says Jennifer Cronenberg, senior counsel and director of legal information at the National Organization of Social Security Claimants’ Representatives (NOSSCR).

  • “Anyone who is already receiving SSDI benefits who returns to any type of work should report their earnings to SSA immediately,” Cronenberg says. This is to avoid overpayment; they should also report a decrease or cease in work to avoid underpayment.

Work incentive programs

The SSA has three programs called work incentives to support disability recipients in returning to work. These can be “pathways for disability benefits recipients to test their ability to return to work without immediately losing their benefits,” Cronenberg says.

Trial work period

A trial work period allows a disabled person to test their ability to earn an income on their own for a set amount of time

.

  • You’ll trigger a TWP automatically if you start earning over $1,050 per month while already receiving SSDI.

  • A TWP allows you nine months, not necessarily consecutive, in a rolling 60-month period in which you can earn any amount of money and still receive your full SSDI benefits.

  • You must still meet the definition of a disability and report your earnings to the SSA to qualify for a TWP.

  • “Earning well above SGA during a TWP could trigger a continuing disability review (CDR) with SSA, whereby they may determine that you’re no longer disabled and terminate your benefits,” Cronenberg says.

Extended period of eligibility

When the nine months of a TWP end, an extended period of eligibility gives you 36 more months to continue working and collecting SSDI.

  • Your income must stay below the SGA limit for the year ($1,470 for 2023, $2,460 if you’re blind) during an EPE.

  • Your benefits will be suspended if you earn above SGA during the 36-month period, but they can be reinstated if your earnings dip below SGA again.

  • If you earn above SGA but have other work incentives that apply, you can continue receiving benefits, Toruno says. For example, any work expenses that a person incurs because of their disability — such as transportation to and from work or specialized work equipment — are deducted from their earnings

    .

Ticket to Work program

The SSA’s Ticket to Work program connects SSDI recipients with free employment services such as career counseling and job placement to help them return to work

.

  • Ticket to Work provides services instead of placing earnings limits. It’s “something that a person who is receiving SSDI can participate in if they would like help returning to the workforce, with the goal of reducing their need for SSDI,” Cronenberg says.

  • The SSA won’t conduct a CDR (and potentially suspend your benefits) while you’re participating in Ticket to Work.

  • Anyone receiving SSDI and interested in working qualifies as long as they are still disabled.

Frequently asked questions

What is a work incentive?

The SSA offers work incentive programs to help SSDI recipients return to work. A trial work period and extended period of eligibility allow you to continue to earn income, and the Ticket to Work program offers education, training and rehabilitation programs for individuals who need help looking for or staying in work.

Does SSI offer the same work incentives as SSDI?

SSI offers its own set of work incentives and programs that come with different rules and stipulations than SSDI. You can learn more on the Social Security website.

What happens if I lose my job while I’m on a trial work period?

If you start earning money that triggers a trial work period and then lose your job, you’ll keep your benefits. If you lose your job within your 36-month extended period of eligibility, you’ll need to contact the SSA to have your benefits reinstated.

Will I lose my Medicare coverage if I lose SSDI benefits?

No, you’ll still receive free Medicare Part A coverage for at least 93 months after your trial work period if you stop receiving SSDI payments because of your earnings. This is one of SSA’s work incentives. You’ll still need to pay a premium to receive Medicare Part B.

Source: nerdwallet.com