20 CFR 416.1201, 416.1205, 416.1220, 416.553, and 416.554
The general issue before the Appeals Council is whether the claimant is eligible for SSI benefits. Specifically at issue is whether the claimant possesses excess resources, and if so, whether recovery of the ensuing overpayment of $2,157.99 may be waived.
The claimant, who was born on January 10, 1921, and resides with his ineligible spouse, applied for SSI benefits on July 12, 1979. The claim was denied by SSA through the reconsideration level on the basis that the claimant was "not under a disability." However, at a hearing conducted on May 22, 1980, the administrative law judge held that the claimant had been under a "disability" since the date of his application. SSA initiated payments to the claimant in August 1980. During the period July 1979 through December 1980, the claimant received SSI benefits totaling $2,157.99.
On December 11, 1980, and again on December 31, 1980, the claimant was advised that his resources had been excessive since the date he had filed his application, and that as a result, all SSI benefits paid to him had been erroneous. It appears that the sole item that the claimant possessed which caused his ineligibility was a contract for deed executed on February 3, 1978.
The contract was entered into so that the claimant could sell his 496-acre farm, which was located in North Dakota, to his son. The sale price of the property was $74,000, toward which a $21,400 down payment was made. The balance ($53,000) was to be repaid in 20 equal annual installments with interest at the rate of 5% per annum on the whole of the principal sum remaining unpaid. Each annual payment was due on September 1 of each year. At the time of the Appeals Council's review, the remaining principal was $42,400.
The claimant contended that he could not readily dispose of the contract for deed, especially in view of the low rate of interest it provided. Accordingly, he argued that the contract for deed should not be considered a resource within the meaning of § 416.1201(a) of Regulations No. 16.
Section 1611(a)(1) of the Act provides, in part, that each aged, blind, or disabled individual who does not have an eligible spouse and ". . . whose resources, other than resources excluded pursuant to section 1613(a), are not more than (i) in case such individual has a spouse with whom he is living, $2,250 . . . shall be an eligible individual for purposes of this title." The resource limitations also appear in § 416.1205 of Regulations No. 16.
Section 1613(a)(3) of the Act excludes from an individual's resources "other property which, as determined in accordance with and subject to limitations prescribed by the Secretary, is so essential to the means of self-support of such individual . . . as to warrant its exclusion."
Section 416.1201(a) of Regulations No. 16 defines "resources" as cash or other liquid assets or any real or personal property that an individual (or spouse, if any) owns and could convert to cash to be used for his support and maintenance. If the individual has the right, authority or power to liquidate the property, or his share of the property, it is considered a resource. If a property right cannot be liquidated, the property will not be considered a resource of the individual (or spouse).
Section 416.1201(b) of Regulations No. 16 defines "liquid resources" as those assets that are in cash or are financial instruments which are convertible to cash. Liquid resources include cash on hand, cash in savings accounts or checking accounts, stocks, bonds, mutual fund shares, promissory notes, mortgages, and similar properties.
Section 416.1220 of Regulations No. 16 provides that the exclusion of property essential to self-support applies to both property used in a trade or business and to property not used in a trade or business. In the case of property not used in a trade or business, however, the exclusion does not apply to liquid resources, even if they are producing income.
North Dakota Century Code section 35-03-01.1 defines the term "mortgage" as a contract by which specific real property capable of being transferred is hypothecated for the performance of an act without requiring a change in possession, and includes a transfer of an interest in real property, other than a trust, made only to secure the performance of an act.
Section 1631(b) of the Act provides that where there has been an overpayment, the Secretary shall recover such overpayment unless the overpaid individual was without fault with respect to such overpayment, and recovery of the overpayment would either defeat the purpose of title XVI, or be against equity or good conscience, or impede efficient or effective administration of title XVI because of the small amount involved.
Section 416.553 of Regulations No. 16 provides that recovery of an overpayment will be considered to defeat the purpose of title XVI if recovery would deprive the overpaid individual of income or resources necessary to meet his ordinary and necessary living expenses.
Section 416.554 of Regulations No. 16 provides that recovery of an overpayment will be considered to be against equity or good conscience if the overpaid individual, in reliance on such payments or on notice that such payment would be made, relinquished a valuable right or changed his position for the worse.
An examination of the contract for deed indicates that there is no legal restriction that would prevent the claimant from selling the contract to another individual. Although the record contains evidence to the effect that various financial institutions would not be interested in the contract at its present terms, the record also contains evidence that it may be saleable if the face value of the contract were substantially discounted. In fact, the claimant received an inquiry from an individual who expressed an interest in buying the contract for $23,760 (at a time when the remaining principal was $45,050). The claimant responded by asking for $35,000 for his interest in the contract. The Appeals Council believes that the contract is marketable but at a price which is probably less than that desired by the claimant. There is no provision in either the Act or its implementing regulations that would exclude from consideration as a resource any item solely because it is not convertible into the amount of cash desired by the seller. Consequently, the Appeals Council is of the opinion that the contract for deed constitutes a resource, the value of which is well in excess of $2,250.
Although the contract for deed produced income at a rate of 5% per annum, § 416.1220 of the regulations provides that property not used in a trade or business may only be excluded as property essential to self-support if the property is not a "liquid resource." The Appeals Council has studied the contract for deed and is of the opinion that it is clearly a "mortgage" within the meaning of section 35-03-01.1 of the North Dakota Century Code, and as such, is considered a liquid resource within the meaning of § 416.1201(b) of the regulations. Consequently, the Appeals Council concludes that the contract for deed may not be excluded as a resource essential to self-support.
In view of these findings, it follows that the claimant has not been eligible for SSI benefits since the date of his application, and that all payments made to him ($2,157.99) constitute an overpayment. The claimant has requested that recovery of the overpayment be waived under section 1631(b)(1) of the Act.
Although the evidence of record indicates that the claimant was "without fault" in incurring the overpayment, the record further indicates that recovery of the overpayment would not "defeat the purpose of title XVI," as defined in § 416.553 of the regulations. Besides the contract for deed and its substantial value, the claimant's spouse earns approximately $700 a month (before deductions), and the claimant receives about $5,000 a year as payment on the contract for deed, as opposed to living expenses of approximately $770 a month. In view of the totality of the claimant's financial circumstances, the Appeals Council does not believe that recovery of the overpayment would deprive him of income or resources necessary to meet his ordinary and necessary living expenses. In addition, the record contains no evidence that recovery of the overpayment would be against "equity or good conscience," as defined in § 416.554 of the regulations. The Appeals Council therefore must conclude that recovery of the overpayment may not be waived.
 Although property agreements on real estate wherein the property is security for payment of amounts owed by the purchaser are generally referred to as mortgages or deeds of trust, they may also be called contracts for deed.
 For applications filed March 1, 1981, or later, section 1613(c)(1) of the Act provides that the uncompensated value of any nonexcluded resource sold or given away at less than fair market value within the preceding 24 months for the purpose of establishing eligibility must be counted toward the resource limit. Uncompensated value is the difference between the fair market value of the resource and the compensation received if it is less than the fair market value. The fair market value is the amount for which the resource can be sold on the open market. (Discounting of financial instruments is a common business practice and, in many cases, the discount price as opposed to face value is the fair market value of an asset.)
 See footnote 2.
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