New Moms: Blacklisted by Mortgage Lenders?
A California-based mortgage lender will pay $48,000 to settle allegations it denied or delayed mortgages to women because they were on maternity leave, the U.S. Department of Housing and Urban Development announced July 1. Women's mortgage applications cannot be denied because they are pregnant or on maternity leave, because such familial status- and sex-based discrimination violates the Fair Housing Act.
A married couple filed a complaint against Greenlight Financial Services, of Irvine, Calif., saying the lender denied their application to refinance because the wife was on maternity leave. Their complaint prompted an investigation, which found four additional Greenlight%VIRTUAL-pullquote-Women have often gone back to work early (which they shouldn't have to do) in order to close out the loan.% applicants allegedly denied mortgages because they were on maternity leave, or their mortgages were allegedly delayed until the women returned to work.
Greenlight Financial Services will pay $20,000 to the couple who filed the complaint and $7,000 to the other four applicants. The company no longer issues home loans, but if it returns to mortgage lending, it will provide annual fair lending training to its employees. Greenlight, which displays an "Equal Housing Lender" icon on its website, did not return a request for comment. This isn't an isolated incident.
During the past few years, HUD has received an increasing number of complaints from consumers saying they've been denied mortgages because they're pregnant or on maternity leave. Since 2011, when the first of its kind was filed, 105 were sent to HUD, 39 of which were received since the start of the fiscal year in October.
Other lenders have settled such complaints, and more are likely to surface. It's the strongest new trend in complaints, said Sara Pratt, HUD deputy assistant secretary for enforcement and programs, and the department is working to make sure lenders know such actions are unlawful.
The issues stem from incorrect assumptions about pregnant women and new mothers.
"What we typically find in an investigation is evidence of stereotyping and or assumptions of borrowers who are pregnant," Pratt said. "The most common assumption is the woman will not go back to work after she has her child."
Lenders also assume women won't have sufficient income to support the loan when pregnant or on leave. Pratt said the women filing these complaints are qualified borrowers, but the lenders seem to have acted on stereotypes without really looking into the matters.
There have also been cases of mortgage insurance providers discriminating against pregnant and new mothers, and in some cases, loans cannot be approved without mortgage insurance. Women have often gone back to work early (which they shouldn't have to do) in order to close out the loan.
"They say 'We're sorry, you're qualified, but we won't close the loan until you go back to work," Pratt said. These women always planned on returning to work, but until they actually did, lenders delayed mortgage approval.
HUD is working to increase awareness of this issue among consumers and lenders, not only through education efforts but by publicizing enforcement actions like the Greenlight settlement and lawsuits carried out by the Department of Justice.
If you're planning on applying for a mortgage soon, it's vital to check your credit scores before you go to the lender so you know where you stand. You can see two of your credit scores for free every month on Credit.com.