The U.S. Department of Housing and Urban Development (HUD) is taking action against mortgage companies who discriminate against expectant mothers applying for a loan or home mortgage insurance.
Multiple investigations of lending practices last July triggered HUD’s recent action to enforce the Federal Fair Housing Act (FFHA), which prohibits discriminatory actions in housing based on a variety of factors, including an individual’s sex or familial status. HUD’s investigations revealed pregnant women or their families were denied a loan or delayed in the process of obtaining one. Lenders cited their reason being the expectant mother and her household would not have the sufficient income to make mortgage payments due to the mother’s maternity leave.
In a recent settlement agreement between HUD and national mortgage lender Cornerstone Mortgage Company, the lender agreed to:
- compensate a woman $15,000 who claimed she had been denied a mortgage loan even though she was on paid maternity leave and planned to return to work;
- create a $750,000 fund for other borrowers who claimed the lender discriminated against them due to their pregnancy or maternity leave at the time of their loan application process;
- notify all borrowers of their right to seek compensation if they had experienced discrimination due to their pregnancy or maternity leave;
- pay up to 100 claimants $7,500 each, and for every claimant after that, pay a prorated share of the $750,000 fund; and
- adopt a new policy which clarifies lending practices towards borrowers on maternity or parental leave.
first tuesday take: Prohibited discriminatory practices are unacceptable when carried out by lenders who are in the business of making mortgages. However, for the family involved, the current landscape of anemic job recovery and real estate pricing woes solicits prudent financial planning by the family itself.
Fair lending laws such as the federal Equal Credit Opportunity Act (ECOA) and the California Unruh Act prohibit discriminatory lending practices towards individuals regardless of their race, color, religion, national origin, sex, marital status or age. Under those protections, lenders may not deny a loan if a woman is expecting, on maternity leave or of childbearing age. [For more information on recent mortgage lending practices with expectant parents, see the August 2010 first tuesday article, Expectant parents may not qualify for a home loan.]
Lenders are held to this legal justice towards prospective borrowers, no questions asked – but what about a borrower’s financial justice towards himself?
Raising a child is an added expense on top of other financial obligations, so if an expectant parent or family is looking to buy a home, it is imperative for them to realistically determine whether they are financially competent to handle the costs of homeownership no matter how underpriced and great a bargain the property may be. Flexibility provided by renting may well be the prudent housing decision.
Important questions for prospective homebuyer-parents facing a birth need to consider are:
- Will the household income during maternity or parental leave be sufficient to make and continue mortgage payments, in spite of lender loan approval?
- If the expectant parents plan to return to work after the birth, how long will it be until they do?
- Will the added costs of raising a child (ex: food, healthcare, childcare, etc.) significantly stress the household budget?
- Are cash reserves or resources sufficient to cover any emergency expenditure due to the birth?
Wanting to own a home to house your family is commendable if job and family conditions are stable and will remain local. Go ahead and bring the baby home. Just avoid bringing the bundle of joy to household finances that will go underwater for failure to consider the risks posed by foreseeable costs associated with birth. You are not able to control the real estate market but you do have control over the welfare of your family.
Buyer’s agents working with buyers need to pay attention to the financial commitment they are negotiating on their client’s behalf by simply asking questions, including those noted above.
RE: “HUD Acts Against Pregnancy Discrimination in Home Mortgages” from the U.S. Department of Housing and Urban Development
“The U.S. Department of Housing and Urban Development (HUD) is taking action against mortgage companies who discriminate against expectant mothers applying for a loan or home mortgage insurance.”
They still haven’t learned their lesson. After forcing mortgage companies to make loans to unqualified buyers, and then washing their hands of the whole mess, blaming the housing crisis on “greedy mortgage brokers” and RE agents, they’re dipping their toes back into the water in the name of social justice. How long are we going to put up with these government idiots?
“…prohibit discriminatory lending practices…lenders may not deny a loan if a woman is expecting, on maternity leave or of childbearing age”.
Discrimination is what makes us different from dogs and goats. To outlaw discrimination is the same to punish someone for thinking.
I have been impressed by the refreshingly independent First Tuesday “Take” that often accompanies your news articles. Your editorial tone certainly does not tow the standard it’s-all-good if it’s good for business line. You accept a certain responsibility and encourage your students/ readers to do the same. You question authorities and their policies. “We” don’t have another voice that speaks that way to and possibly for the agent community.
When you raise questions and factors to consider, you’re most effective (for me). When you stray into a more preaching style with a narrower viewpoint, however, you risk alienating some of the readership. Beyond that, it tiptoes from education toward the realm of propaganda, even if good propaganda. This undercuts your good work in dismantling propaganda so prevalent elsewhere in the real estate media.
In “Babies and mortgages, mingle with discretion”, the ‘Take’ is too long. The first paragraph may be enough. After that, the advice offered to agents is commingled with well known regulations. The intended audience is also commingled (agents vs buyers).
Perhaps a new section called THE PROACTIVE AGENT (or something) can contain such suggestions as arise from the ‘Take’ itself. Thus, one could recommend that agents review the feasibility of the purchase independently from the loan officer, whose review is more about approval than prudence. Talk it up, certainly, but try not to be caught appearing to talk down!
Finally, with purchase payments lower than rent even before taxes, and both rents and interest rates destined for higher ground over time, your perspective is unnecessarily pessimistic in my view. The Proactive Agent can ensure that those payments REMAIN lower than rent by encouraging the buyer NOT to purchase too much home, however tempting that might be. Now that SOUNDS like it came from an experienced agent, which is a very important thing for a company selling mainly experience in real estate education.
Love and success.
Blah, Blah, Blah….to this author. No one has a magic ball that can tell the future. Make your decisions based on today and let the future fall where it may. If we all waited until the “perfect moment” very few would have kids, marry, buy a car, a home…etc…