Some lenders allegedly deny mortgages to women on maternity leave

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Should being pregnant and taking maternity leave ever be reasons to be turned down for a home mortgage or having your loan closing postponed?

You might think not, but two new legal actions by federal fair lending regulators suggest that the mortgage industry — and even federally run financing giants Fannie Mae and Freddie Mac — may need to address the issue.

In one case, a Seattle-area physician settled a discrimination complaint with Cornerstone Mortgage Co., a national mortgage banking firm based in Houston. In the second, the Department of Housing and Urban Development accused MGIC, one of the country’s highest-volume mortgage insurers, of discrimination by underwriters against a Pennsylvania homeowner whose application allegedly was denied because she was on maternity leave.


In the Cornerstone settlement, federal regulators alleged that the lender initially approved the applicant for a mortgage but later said that her income while on maternity leave could not be considered in qualifying for the loan. That, in turn, was a violation of the Fair Housing Act, regulators said, because it limited her ability to obtain financing based on her “sex and/or familial status.”

Cornerstone did not respond to a request for comment, but in the settlement agreement denied any wrongdoing and said the issue arose because the applicant “failed to disclose … that she would be on leave from her employment.”

As part of the settlement, Cornerstone agreed to pay the applicant $15,000 and to create a $750,000 escrow fund to pay potential claims from other women who may have been harmed by Cornerstone’s maternity-leave policies during the last two years.

The government’s complaint against MGIC alleged that the company denied a Pennsylvania couple’s application for insurance “unless and until the wife returned to work from maternity leave.” An MGIC spokeswoman said the company’s policy was not to comment on pending litigation.

John Trasvina, HUD’s assistant secretary for fair housing and equal opportunity, said federal law on the issue of maternity leave was clear: “Pregnancy is not a basis to deny or delay a loan. 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.”

Kristin Rowe-Finkbeiner, executive director of MomsRising, a group that advocates for equitable treatment of mothers, said in an interview that the Cornerstone and MGIC cases were emblematic of the widespread but little-publicized discrimination that working mothers face.


“This is very common — it just doesn’t get a lot of attention” from the mortgage industry or, until now, from the government, she said. Her group has received 200 reports from credit applicants who said they were discriminated against because they were on — or scheduled to begin — maternity leave.

Much of the problem, Rowe-Finkbeiner said, arises from “outdated assumptions” about working women who get pregnant and need to take leave. “The assumption is that women may not be returning to their jobs,” she said, and therefore counting their income toward loan qualification would be risky for the lender. But today’s economic realities require most of them to resume their employment to help support the family and pay the bills, including the mortgage, she said.

Some lenders and loan officers, however, counter that the real problem is that they have not received specific instructions on how to handle maternity-leave situations from Fannie Mae and Freddie Mac. John Councilman, chief executive of AMC Mortgage Corp., said in an interview that he was surprised that the two dominant investors had provided no detailed guidance on how to evaluate income from applicants on, or heading for, maternity leave.

Representatives of both companies confirmed that maternity and pregnancy are not addressed by name in their manuals for lenders, but this does not mean lenders are free to discriminate against applicants who are pregnant or on maternity leave who can demonstrate that they qualify for a mortgage.

Amy Bonitatibus, Fannie Mae’s spokeswoman, said the company’s rules “do not preclude lenders from underwriting mortgages for borrowers receiving short-term disability payments, on short-term leave or expecting to be on short-term leave, including borrowers on maternity leave.”

HUD said it was reviewing both companies’ guidance to lenders “to determine if they satisfy the Fair Housing Act, including income verifications for persons taking maternity or parental leave.”


Bottom line: If you or your spouse have experienced discrimination on a mortgage application because of maternity leave, you may have a remedy: File a complaint with HUD at (800) 669-9777 or online in the fair lending area at

Distributed by Washington Post Writers Group.