When you’re on maternity leave — with full pay from your employer — you probably don’t expect a mortgage lender to reject your loan application because your income doesn’t count since you haven’t yet returned to your job.
Yet that’s what a woman in Philadelphia says she experienced when she and her husband sought financing to complete renovations on a house in the city. And she’s hardly alone. According to the Department of Housing and Urban Development, the agency that handles federal fair housing complaints, there have been in excess of 200 cases alleging maternity-related discrimination against women seeking home mortgages in the past six years.
Some of the lenders in past cases that have gone to settlement involve companies prominent in banking and mortgages, including Wells Fargo Home Mortgage, Bank of America, PNC Mortgage and MGIC, the mortgage insurer. In all agreements, the accused companies denied wrongdoing.
Under the Fair Housing Act, enacted in 1968, it is unlawful to discriminate in real estate transactions, including mortgage lending, on the basis of race, color, national origin, religion, sex, disability or familial status. That means lenders cannot deny - or delay - a loan simply because an applicant is on maternity leave but is otherwise qualified.
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In the Philadelphia woman’s case, which resulted in a “conciliation agreement” July 29 with Citizens Bank, N.A. and Citizens Bank of Pennsylvania, the problem was that her pay stubs contained the wording “short term disability,” she told me. That troubled an underwriter at the bank, who suspected that she might not be planning to return to her job full time, she said. This was despite the fact that she and her employer were both willing to provide a letter specifying her date of return to work to allay any concerns. Without her income being counted in the application, the bank concluded that she and her husband would not be able to qualify for the financing they requested. The woman, whose name was redacted from the agreement, requested that she not be identified when I interviewed her.
“I’m getting full pay on maternity leave,” she said she explained to the loan officer. “This is not 1950 and you shouldn’t be penalizing me!” Citizens, which is the 13th largest retail bank in the country, according to its website, denied discriminating against the woman but agreed to make payments totaling $115,000 – $40,000 to her and $75,000 to an unnamed fair housing advocacy group. The bank also agreed to conduct fair lending compliance sessions with its staff and to adopt a “parental leave policy.”
In a statement, Citizens said “we follow fair lending practices and are committed to ensuring equal access and consideration for all customers” plus providing “ongoing training for colleagues.” The bank ultimately came through with the financing requested by the woman and her husband, but only after she had returned to her job, she said. By then, she had filed a complaint with HUD.
Shanna L. Smith, president and CEO of the National Fair Housing Alliance, says “there needs to be much better training for [lenders] about how to deal with interrupted income for loan closings when a woman is pregnant and [on] paid maternity leave.” In one case brought by Smith’s group and now pending at HUD, a loan originator in Arkansas told an applicant that “even though she was on paid maternity leave, she would have to be back at work for the loan to close,” according to Smith.
Curiously, interrupted income situations don’t seem to be a problem for lenders “when it is a factory or seasonal male worker,” Smith said. But for a pregnant woman, the treatment too often is different - underwriters don’t seem to be able to calculate qualifying incomes properly. This is especially so, said Smith, when loan originators or underwriters “have been with the bank a long time,” and are still operating on rules from past decades that required women to return to work before a mortgage could go to closing.
Though discrimination like this is relatively uncommon — given the large numbers of applications by pregnant women or those on maternity leave that are funded without a hitch — it still occurs. If you or someone you know encounters it, contact HUD’s fair lending office at 800-669-9777.
As the mortgage applicant in Philadelphia put it so well, this is no longer the 1950s. Federal law requires fair treatment of anyone on maternity or parental leave. Banks need to get it.
Kenneth Harney is executive director of the National Real Estate Development Center.