Who says you can't have a baby and get a mortgage at the same time?
Some lenders and mortgage insurance companies do.
Federal law prohibits housing discrimination in sales, rental, and lending based on a person's sex or familial status. According to HUD, that includes pregnancy. But some companies don't seem to understand that.
Stories of women who are denied a mortgage loan because they are on, or about to go on maternity leave, happen more often than you think. Lenders claim they are putting the loan on hold because of the temporary loss of income and won't approve the loan until mom returns to work.
No matter how they try to spin this, it's just wrong. Taking 12 weeks off to take care of your newborn isn't the same as being unemployed. And HUD will back me up on this one.
"Pregnancy is not a basis to deny or delay a loan. It's just that simple," says John Trasviña, HUD assistant Secretary for Fair Housing and Equal Opportunity. "Mortgage professionals may verify income and other resources and have eligibility standards, but they may not single out women on maternity leave to deny or delay loans that they are otherwise eligible for."
HUD started cracking down on this problem last year after The New York Times published a story shedding light on the issue.
This week, HUD announced a settlement agreement with a company it had investigated, Cornerstone Mortgage Company, a national mortgage lender based in Houston, which HUD has accused of "engaging in discriminatory lending practices against expectant mothers."
The agreement resulted from a complaint made by a woman who claims the lender changed the status on her application when it learned she was on maternity leave. The woman alleges Cornerstone conditioned the approval of the loan on her return to work, which she eventually ended up doing, according to settlement agreement.
Cornerstone denies any wrongdoing or discrimination and claims it "engaged in prudent loan underwriting," according to settlement document, but agrees to pay the woman $15,000 and create a $750,000 fund to compensate other Cornerstone borrowers who experienced discrimination because they were on pregnancy or maternity leave at the time they were applying for a loan.
Cornerstone will have to notify all borrowers who applied for loans during a two-year time frame and the fund will pay as many as 100 claimants.
But as many other human beings, mortgage professional's don't learn from others' mistakes.
HUD also announced this week that it has filed a lawsuit against mortgage insurer MGIC charging the firm with "discriminating against a Pennsylvania family by denying their application for mortgage insurance unless and until the wife returned to work from maternity leave."
Let's wait for the outcome on this one.