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Pregnancy Might Cause Your Mortgage To Be Declined
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Mortgage Discrimination: Can A
Woman Be Declined Because She Is
Pregnant?
The Fair Housing Act clearly says that discrimination is prohibited in the sale, rental and
financing of dwellings, based on race, color, national origin, sex, familial status or pregnant
women. Back in June, the Department of Justice filed a lawsuit against Morgan Guaranty
Insurance Corporation (MGIC) claiming that the insurer violated the Act. MGIC allegedly
required a woman to return to work from maternity leave before the company would insure
her mortgage.

The Department of Justice took the position that the actions of MGIC would hurt the woman's
chances of getting a mortgage. This was a clear case of familial and sex discrimination.

The case raises the issue of a mortgage lender declining a woman because she is pregnant.
If a lender, before the closing date, discovers that a female borrower will be at home with her
baby the loan could be declined.

It all boils down to debt servicing. The lender will argue that the borrower will be on a reduced
income for an extended period of time. Furthermore, since the stream on income would be
for less than three years, the amount couldn't be used in calculating debt-to-income ratios.

Not too long ago, lenders would have looked the other way and approved the loan. However,
lenders have become a group of conservation "old boys". They are underwriting to the letter.
The thought of having to buy back a bad loan sends shivers down their spines. We should
remember that the lenders are following the underwriting guidelines of Freddie Mac and
Fannie Mae. The guideline states that the borrowers income should be stable and should be
for a minimum of three years.

Some lenders would even go as far as to re-verify the borrower's employment 2 or 3 days
before closing. You can imaging the chaos this would have if a co-worker innocently says that
the borrower "had a beautiful baby girl two days ago, and will be home on maternity leave for
3 months".

In defense of the lender he can not ask a borrower if she is pregnant. And he certainly can not
ask her how long she plan to stay at home on maternity leave. For most lenders, these are
answers you just do not want to hear.

All these issues causes unbearable stress on the woman. She just had a baby two weeks
ago. She is about to close on her dream house in four days. She is all packed and ready for
the move. Then a call from the bank and she is told there is a big problem, "we are unable to
fund your mortgage at this time".

Actions to take to save the mortgage.

Here are a few suggestions that will help. Get these tasks done weeks before the closing.

>>>Obtain a letter from your doctor saying when you will be expected back at work.

>>>Obtain a letter from your employer saying when you will return to work and your salary.

>>>If you have any accumulated sick days or vacation days, use these days as part of your
maternity leave. The advantage here is that these days would be at your full regular salary
rate.

If you suspect that your refusal of a mortgage was because you were pregnant, you should
report the lender. Here are some resources:

FHA violations
Office of Fair Housing and Equal Opportunity (HUD)
1-800-424-8590
www.hud.gov/fairhousing

State chartered banks insured by the FDIC
Consumer Response Center
1-877-275-3342
www.fdic.gov