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No mortgages for the pregnant?

By Polyana da Costa · Bankrate.com
Thursday, June 2, 2011
Posted: 4 pm ET

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.

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13 Comments
Tanya
July 12, 2011 at 11:23 am

"Hopefully, moms-to-be will be smart and not take on a mortgage if they think they might opt to quit work in the near future."

Or maybe people shouldn't buy homes that they can't afford unless both people are working. America has to let go of the "keeping up with the Jones" mentality and learn to live within their means. That will alleviate a lot of financial woes as well because if one of them ever losses their job they would still be able to make it. Just because you can "afford" a $2000 mortgage doesn't mean you should get one.

Mortgage Mike
June 17, 2011 at 3:36 am

I am a mortgage loan originator for the largest national lender. My underwriting dept is constantly requiring mothers to return back to work as a condition of Loan approval. They are simply following Fannie, Freddie, and FHA underwriting guidelines.

Annie M.
June 14, 2011 at 7:11 pm

My daughter, college grad, gainfully employed, had her loan approved, and then at the last minute there were "complcations" with the loan. She was 7 months pregnant at the time. The stress of trying to complete the loan process (she met every requirement they wanted to add as conditions to funding the loan, even though they had no legal right to add these conditions) was what I believe caused her to go into premature labor and deliver 9 weeks early! She expressed to them that is illegal for them to hold up her (already approved) loan, that her lawyer was contemplating a lawsuit over the premature delivery, and oh, by the way, here's a check for the first SIX house payments she had sitting in the bank in anticipation of her maternity leave. They funded the loan, she closed on the house and is now in the process of refinancing with a new lender and filing a complaint about the old one!

Mike
June 10, 2011 at 10:46 am

Lenders are not between a rock and a hard place. These lenders blatantly disregarded the laws, and chose to violate them. That needs to be punished, not ignored.

Karo
June 09, 2011 at 2:03 pm

To Tom-If banks required a six month cash cushion to get a mortgage then 90% of people/families wouldn't qualify!!!! Most people have less than a month's income for emergencies. If a borrower can afford one week's take-home pay for the mortgage payment(including taxes and insurance)then they should be able to afford it. Never buy a house costing more then 3 times your gross income is another way to look at it.

smith207
June 06, 2011 at 9:48 pm

@Tom- Pregnancy or the birth/adoption of a child is not a basis to deny a loan- because of FMLA a new parent is guaranteed his/her job (guaranteed the same income) when they return from leave. We are talking about 12 weeks of leave out of a 15 or 30-year mortgage. Let's have some perspective.

@Carolyn- you are absolutely right- all loans are a risk. Any borrower could opt to quit their job any time after a loan closes.

Jack Smythe
June 06, 2011 at 9:30 pm

And these are the same banks that we bailed out with TARP. Why didn't we put them "on hold" until they recover? Our money was taken from us by force so that we can bail out these idiots.

Debra
June 04, 2011 at 11:43 pm

Maternity leave doesn't typically mean unpaid leave. Many women save up their sick time, and then go on short term disability for the majority, if not all, of their maternity leave. So, they are generating income during this period. There are some who take unpaid Family Leave (which is available to both men and women) that kicks in after their maternity leave time period has expired.

Maybe, I am missing something, but this article doesn't indicate whether the women were not generating income while on maternity leave when their mortgage loan was denied/delayed. It is ridiculous to assume that a woman will not return to work after having a baby, many mothers do not have an option, and cannot afford to stay at home.

Tom
June 03, 2011 at 4:15 pm

If the applicant doesn't have enough income and/or cash reserves to qualify for the mortgage, then the should be denied. Being on maternity leave typically means unpaid leave, so no income. I'm all for denying these applications. If their income is expected to be sufficient after they return to work, and they have enough cash reserves to cover that period of time plus a 6 month cushion (which in my opinion everyone should be required to have) then I believe they should be approved.

Carolyn Warren
June 03, 2011 at 1:56 pm

Lenders are between a rock and a hard place. They are criticized for letting people with shaky income get loans. They also know that many women who take maternity leave quit their jobs at the end of the leave.

Because it is illegal to discriminate, making a loan to a borrower on maternity leave is a risk the lenders are going to have to take.

But then again, all loans are a risk. Any borrower could opt to quit his or her job any time after a loan closes.

Hopefully, moms-to-be will be smart and not take on a mortgage if they think they might opt to quit work in the near future.

Carolyn Warren, author
Homebuyers Beware
Mortgage Rip-Offs and Money Savers
Praying Through Your Pregnancy