Posts Tagged ‘underwriting guidelines’

So once again, not really on topic for employment law, but it does fall within the discrimination context so I’m blogging about it today. 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. 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.

Based upon new guidelines passed by Fannie Mae and Freddie Mac, lenders are now required to recheck a borrowers income right before the loan closes, not just just when the contract is signed. In addition, the lender must also document that the lenders income is likely to continue for at least three years.

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 reapply for the mortgage once she returns to work.

Mortgage lenders say they are not discriminating against pregnancy but against income. 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.

So the question is whether this pregnancy mortgage discrimination can be brought under the Equal Credit Opportunity Act claiming gender discrimination or a violation of some other federal or state law. Would love to test this policy out in the courts. Someone bring me a test case please?

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