Let me be clear right up front: Discussion and occasional controversy over HUD guidelines can be both healthy and helpful. A great example of this is Paragraph 5-6L5, page 5-15 of HUD Handbook 4350.3, Rev. 1 which states: “Other state, local government, social security or private pension funds paid directly to an applicant’s/tenant’s former spouse pursuant to the terms of a court decree of divorce, annulment, or legal separation are also not counted as annual income… .”
Recently, a state housing agency published in its electronic newsletter an opinion from a local HUD office that this provision referred to “splitting of assets” in connection with a pension, and did not pertain to garnishments for alimony and/or child support from social security. And to be absolutely fair to this interpretation, Paragraph 5-6L4 refers to a state court settlement on this issue of OPM pension funds as assets.
The problem the interpretation now poses is this: There are times when pension funds are assets (pre-retirement), and there are times when they are not assets but income (after retirement, being received as periodic payments, with remaining amounts NOT counted as assets per other HUD guidelines). If a divorce occurs at this stage, the pension being “split” is not an asset at all under HUD guidelines, it’s pure income.
Aside from this, assets and asset income are found in Paragraph 5-7, not 5-6. And split pensions are not “paid” to someone; as assets, they are transferred, surrendered, etc. It would have been easy for HUD to say, somewhere in Paragraph 5-6L that this paragraph applied solely and exclusively to the splitting of marital assets. They didn’t, except obliquely.
It is this type of guidance that creates confusion, misinterpretations, and the like. HUD is often very good at very clear guidelines that express exactly what they mean. Unfortunately, Paragraph 5-6L (and Paragraph 7-4D on which I’ve written before) are two examples where some re-wording is called for, in my opinion.