By Molly M. Ginty
Tuesday, September 7, 2010
The legality of tighter mortgage practices is being questioned by a government probe of lending-discrimination complaints by pregnant women. The case was spurred by New York Times articles and the advocacy group MomsRising.
(WOMENSENEWS)--When Olivia Salvador tried to close her mortgage loan in March, she hit an unexpected snag.
"My husband and I were unable to close due to my being on maternity leave," said Salvador, of Oakland, Calif. "Though I was preapproved for my loan, though I was employed and though my leave was federally protected, I was told that in the eyes of my lender, I was unemployed, and thus didn't meet the financial qualifications for my loan. We had to bargain for extra time with our seller and had to wait until after my leave to buy our home."
Complaints such as these were brought to light by the New York Times in a series of stories written by Tara Siegel Bernard in July.
In response, MomsRising, the Seattle-based advocacy group, e-mailed its one million members and received about 120 similar e-mail complaints. The organization then forwarded these to the U.S. Department of Housing and Urban Development, known as HUD.
Now HUD is investigating whether lenders are denying mortgages to women who are pregnant or on maternity leave in violation of the Fair Housing Act of 1968 and the Equal Credit Opportunity Act of 1973.
"We've received seven formal complaints so far and anticipate fielding more," John Trasvina, HUD's assistant secretary for fair housing and equal opportunity, told Women's eNews recently. "Such reports are profoundly disturbing and require immediate action."
Trasvina said press coverage by the New York Times and other publications, combined with pressure from MomsRising, spurred the investigation.
Fannie Mae and Freddie Mac--the two Washington-based, government-sponsored mortgage giants that back most conventional home loans--tightened their lending rules earlier this year.
Since then, lending-rights advocates say borrowers with potential dips or gaps in income are having trouble getting mortgages. That can mean injured workers collecting disability insurance or those who have recently lost jobs or work hours.
Kristin Rowe-Finkbeiner, executive director of MomsRising, thinks pregnant women are bearing the brunt of stricter lending practices.
"Tighter guidelines are affecting many mortgage applicants," she said. "But the problem is that they're affecting women who are pregnant or on maternity leave in disproportionate numbers."
"Mortgage underwriting guidelines have long said that an applicant has to prove she'll have a steady income for three years," said Robert Strupp, a spokesperson for the National Community Reinvestment Coalition, in Washington. "In the past, lenders didn't pay close attention to these guidelines. But now that there's more scrutiny, lenders are rejecting women if they receive a pay cut or go on disability during maternity leave because this creates a gap in their income."
Launched in July and slated to wrap up by November, HUD's investigation may prompt better enforcement of existing laws and could change the methods that lenders use to rate mortgage applicants' financial status.
The agency has pledged to take action against errant lenders and to issue clearer mortgage application guidelines if its nationwide investigation reveals that these moves are necessary.
HUD will not release information on the lenders or women involved until its inquiry is complete.
Under the Family and Medical Leave Act of 1993, women who work for a company with more than 50 employees and who have been at their jobs for at least a year are entitled to up to 12 weeks of unpaid, job-protected leave. But according to the U.S. Department of Labor, only 8 percent of U.S. firms offer women paid maternity leave. This means the vast majority of women experience some disruption in their income after they give birth.
Also complicating the mortgage application process is a stricter system of verifying income.
"In the past, you could just have your immediate boss write a letter for you," said Rick Cason, a mortgage broker in Orlando, Fla. "But now, lenders want a letter--plus a call--from your company's corporate headquarters. They want headquarters to promise you'll be back to work by a certain date and earning a certain salary. In the recession, however, people at headquarters are understandably reluctant to make that guarantee--especially if they are unaware of a faraway worker's case."
Women who have filed complaints with HUD say mortgage lenders are making them jump through more hoops than other borrowers who are on leave or disability and that this is unlawful.
The Fair Housing Act prohibits discrimination based on gender and "family status," which includes pregnancy. The Equal Credit Opportunity Act prohibits discrimination based on gender or marital status. And both acts are being violated if women of childbearing age are receiving disproportionate scrutiny.
"Many lenders may be creating extra loopholes because they assume pregnant women are less likely than other workers to return from leave as planned," said Ariela Migdal, a staff attorney for the New York-based American Civil Liberties Union. "But that sets an unfair standard. If people have knee operations, is there any way to know when they will return to work? Is there any way to guarantee that their medical procedures will go exactly as planned?"
Marc Savitt, a mortgage broker in Martinsburg, W.Va., adds that if a woman is forced in writing to guarantee when she will return from maternity leave, she could violate the terms of her mortgage and potentially lose her home if medical complications stemming from delivery keep her away for a longer time than planned.
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Molly M. Ginty (http://mollymaureenginty.wordpress.com) is a freelance writer based in New York City.
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