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The principal balance of promissory notes, loan agreements and property agreements that are negotiable (can be sold) is counted. The current market value (CMV) may be used when the customer disputes the value of the agreement and provides proof of the actual CMV.
If the note, loan or agreement is not negotiable, it is not counted as a resource. Instead, it must be evaluated as a transfer under MA903G.
How cash proceeds are treated depends on whether the customer is the borrower or lender.
If the customer is the... |
Then... |
Borrower |
The money is not counted in the month received, but any amount remaining in later months is counted as a resource. |
Lender |
Payments received from the borrower are treated as follows: The part of a payment that is applied to the loan principal is counted as a resource. NOTE The part of a payment for interest owed is income, not a resource, in the month of payment. (See MA606KK for more information on treatment of interest income.) |
See Promissory Notes, Loans and Property Agreement Examples.
Term |
Definition |
Negotiable |
A negotiable agreement is a written order or unconditional promise to pay a fixed sum of money on demand or at a certain time. A negotiable instrument can be transferred from one person to another. Once the instrument is transferred, the holder obtains full legal title to the instrument. It does not contain terms which make it unmarketable. If any of these conditions are not met, the agreement is not negotiable. |
Promissory Note |
A written, unconditional agreement signed by an individual who promises to pay a specific sum of money at a specified time, or on demand, to the person, company, corporation, or institution named on the note. A promissory note may be given in return for goods, money loaned, or services rendered. |
Loan |
An agreement for one party to advance money to another party who promises to repay the debt in full, with or without interest. A loan without a written agreement is called an “oral loan”. |
Oral Loan |
A loan agreement without a written agreement of the terms of the loan and repayment. Because there is no written agreement, oral loans are not negotiable. |
Property Agreement |
Pledge or security of a particular property or properties for the payment of a debt or the performance of some other obligation within a specified time period. The following are examples of real property agreements: · Mortgages; · Installment contracts: · Land contracts; or · Contracts for deeds. The following are examples of personal property agreements (chattel mortgages): · Pledges on crops; · Pledges on fixtures; or · Pledges on inventory. |
Proof of the loan or agreement terms:
The proof provided must include the following information:
· The amount of the loan;
· The date the loan was made;
· The date repayment is due in full, or when periodic payments start;
· Amount of payments;
· Frequency of payments; and
· Names of the borrower and the lender
A copy of the agreement or contract is the main source of proof. If there is no written agreement, then a written statement from both the borrower and the lender must be provided. The Request for Proof of Money Borrowed (DE-230) and the Request for Proof of Money Loaned (DE-231) forms should be used to ensure that complete information is received.
Proof of the unpaid principal balance:
Proof of the unpaid principal balance is only needed if the agreement is a countable resource and using the face value would put the customer over the resource limit.
If the face value of the countable agreement or contract plus the value of other countable resources is less than the resource limit, no further action is required.
Otherwise, the unpaid principal balance of promissory notes, loans or property agreements must be verified. Proof includes:
· Written statement of both the borrower and lender of payments made and remaining principal balance;
· Payment books or ledgers;
· Financial statements showing payment deposits;
· Bank statements or letters from bank officers that provide the unpaid principal balance.
Proof of CMV
Reliable proof of CMV is the appraised value obtained by the customer from a knowledgeable source, which includes any of the following:
· Banks;
· Savings and loan associations;
· Credit unions; and
· Licensed loan or mortgage brokers.
Proof of negotiability
Written agreements or contracts are assumed to be negotiable unless they obviously do not meet the definition of “negotiable”. Evidence of a legal barrier to assigning or selling the agreement is accepted as proof that it is not negotiable. If there is no written document, the agreement is not negotiable, further proof is not needed.
Program |
Legal Authority |
ALTCS |
20 CFR 416.1201(a) and (c) ARS 36-2934.02 |