2014 Government Regulations & Business Summit
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It doesn’t get much publicity compared with other home-mortgage issues, but it appears to be a persistent problem: Lenders and mortgage insurers allegedly delay or deny loan applications when a borrower is pregnant or heading for maternity leave.
Their rationale: When a borrower or co-borrower is on maternity leave or expected to be on leave, mortgage companies assume that the household income may decline for an extended period, or the woman may not return to the same employment and salary, thereby increasing the risk of delinquency or default.
But federal law on this is emphatic: Cut it out. Any denial or delay of a mortgage application, according to fair-lending regulations, violates the federal Fair Housing Act, which prohibits any form of unequal treatment based on gender or familial status.
Both the Justice Department and the Department of Housing and Urban Development have settled with – and levied monetary penalties against – a variety of lenders and insurers on maternity discrimination grounds during the past several years. The list includes Bank of America, PNC Mortgage, Cornerstone Mortgage and MGIC, the giant mortgage insurer. The MGIC settlement involved 70 women and led to the creation of a $511,250 compensation fund for the alleged discrimination victims and a $38,750 civil penalty.
The latest settlement came June 25, when HUD outlined a “conciliation agreement” it reached with Mountain America Credit Union, a $3.6 billion asset credit union based in Utah and the 35th largest in the country. Mountain America, as did the previously mentioned companies, denied any wrongdoing as part of the settlement.
According to HUD, which has a specialized staff that handles fair housing and lending complaints, a married couple who applied for a mortgage from their credit union had the application put aside because the wife told the loan officer that she was on maternity leave. Allegedly the credit union told the couple that they could reapply “only when the wife returned to work and received a paycheck.”
Mountain America, which agreed to pay $25,000 to settle the charges, said it was following the underwriting requirements of the private loan insurer it uses, CMG Mortgage Insurance Co. CMG, which changed its name to Arch Mortgage Insurance earlier this year, said it had no comment on the Mountain America agreement with HUD.