Banks Won’t Give Mortgages To Women On Maternity Leave


A number of banks, including Bank of America and PNC Mortgage, have settled with the Department of Justice (DOJ) and the Department of Housing and Urban Development (HUD) over allegations that they denied women mortgages because they were on maternity leave at the time, according to Kenneth R. Harney reporting in the LA Times.

The most recent settlement was one between a couple and Mountain America Credit Union, which denied any wrongdoing. HUD says that the couple applied for a mortgage but weren’t approved because the wife said she was on maternity leave. The couple was allegedly told that they could reapply “only when the wife returned to work and received a paycheck.”

The settlement agreement included excerpts from Mountain America’s underwriting manual, which said that employees could only consider the applicant’s current income if she was on a leave of absence and not expected to go back to work before the closing of the loan. It also said that if the applicant “is not currently receiving income…their regular full-time pay may not be used to qualify — even if they plan on returning to work at some future specified time.”

If true, these actions would violate the Fair Housing Act, which prohibits unequal treatment based on gender or familial status.

A spokeswoman for HUD told the LA Times that “there is a steady flow of complaints” about this issue and that HUD is working on other cases.

The banks’ behavior is reminiscent of some ways that lenders made assumptions about women in lending to them in past decades. As recently as the 1970s, women couldn’t get credit cards in their own names without their husband’s signature based on the idea that if they worked and were married they were likely to get pregnant and quit, or if they were divorced they would be bad with money because they couldn’t manage a marriage. The Equal Credit Opportunity Act made companies give women women their own credit cards in 1974.

Lenders’ decisions to withhold loans on the idea that women’s earnings don’t “count” if they’re on leave, often because they assume women may not go back to work, are based on the same outdated ideas that women get pregnant and quit their jobs in droves. Yet six months after a first birth, nearly 60 percent of women are back at work. More than 70 percent of mothers with young children are in the workforce and four in ten mothers are the sole or primary breadwinner for their families. Things have changed significantly since the 1970s, as mothers have increased their work hours 150 percent, but banks don’t seem to have caught up.

Today’s lenders are right, however, in assuming that the time after the arrival of a new baby can be one of increased hardship. Just 12 percent of American workers can get paid family leave through their employers, and the rest are guaranteed 12 unpaid weeks if they work at a company with 50 or more employees. Those who get partial pay or no pay at all when they have to take time off for maternity leave often struggle to get by. A third end up borrowing money, dipping into savings, and/or delaying bill payments, while 15 percent have to go on public assistance. Many of them, of course, will return to work and once again have income, meaning that in the long-term they will be able to pay back a loan and banks shouldn’t be worried about lending to them.

But both issues would be improved with paid leave. If all workers were guaranteed a period of paid family leave for a new baby, lenders wouldn’t have to be wary about giving women loans. It would also boost the share of women who return to their jobs, as those who have access to paid leave are more likely to return to work than those who don’t.