Mortgage lending: Do not get pregnant if you want to buy a house
If you’re starting a family and would like to buy a house to raise your kids in, there’s something you should know. Women who are pregnant and plan to stay home to take care of the baby may not qualify for a mortgage loan. The economic meltdown, housing crisis and credit crunch have mortgage lenders running scared. Despite the Pregnancy Discrimination Act, mortgage lenders say they are denying mortgages to expectant couples because they must comply with strict new standards for verifying income.
New mortgage lending standards cause pregnancy discrimination
Pregnancy discrimination by mortgage lenders may be an inadvertent consequence of a loan quality initiative that was launched earlier this year by Fannie Mae and Freddie Mac. The New York Times reports that Fannie and Freddie require lenders to recheck a borrower’s financial situation right before the loan closes. Under the loan quality initiative, lenders must document that borrowers have enough income to pay for the loan on closing day, not after the contract was signed. Lenders also must document that the mortgage borrower’s income is likely to continue for at least three years.
Maternity leave a red flag for mortgage lenders
Some mortgage lenders are flirting with pregnancy discrimination because of maternity leave. Mortgage lending standards interpret maternity leave as short term disability insurance. Because the disability payments will not continue for three years, Fannie and Freddie mortgage lenders will not count maternity leave as qualifying income. These mortgage lenders will require the new mother to rerequest the mortgage once she returns to work. The Times article used the example of a couple expecting a baby within weeks. They wanted to make an offer on a home, but they needed both of their salaries to qualify. The mortgage broker said the expectant mother would not be considered “employed” when it was time to close the loan, which would probably disqualify her.
Mortgage borrowers not covered by Pregnancy Discrimination act
Mortgage lenders say they are not discriminating against pregnancy but against income. Lawyers.com reports that the Equal Credit Opportunity Act prohibits lenders from discriminating against gender and marital status. The Equal Credit Opportunity Act also bars lenders from asking about your plans for having or raising children. However, lenders can ask questions about expenses related to your dependents. The federal government moved to make pregnancy discrimination illegal in 1978. The Pregnancy Discrimination Act declares that discrimination due to pregnancy, childbirth or related medical conditions is unlawful sex discrimination. But the Pregnancy Discrimination Act only applies to employment, not borrowing.