Advertisement

Denying Couple Mortgage Because Woman Was On Maternity Leave Costs Bank $35,000

CREDIT: SHUTTERSTOCK
CREDIT: SHUTTERSTOCK

FirstBank Mortgage Partners will pay a couple $35,000 to settle allegations that it denied them a mortgage because the woman was on maternity leave, even though she planned to go back to work.

The couple had their mortgage application approved and had scheduled the closing for their new home, where they planned to move with their newborn twins. But when FirstBank found out that the mother was on maternity leave, it reversed course, denying them the loan. The mother and twins ended up having to move in with her parents while the father and their three-year-old moved to an apartment.

This allegation would violate the Fair Housing Act, which prohibits unequal treatment based on gender or familial status. But it wouldn’t be the first of its kind. The Department of Housing and Urban Development (HUD) has launched 15 investigations into this kind of discrimination against women on maternity leave this year — the department says there is a “steady flow of complaints” — and it has investigated 173 allegations since 2010. A number of banks, including Bank of America and PNC Mortgage, have already settled.

For example, HUD announced this summer that Greenlight Financial Services will pay $20,000 to Stefanie and Jonathan Alvanos, who were seeking to refinance their home ahead of having their first child and were told the bank couldn’t lend to them because of the upcoming maternity leave. It will also pay $7,000 each to four other couples.

Advertisement

Before that, HUD reached a settlement with Mountain America Credit Union, which it said refused to approve a couple’s application for a mortgage because the wife was on maternity leave, telling them they could reapply “only when the wife returned to work and received a paycheck.” The bank’s underwriting manual says that if an 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.”

“In many instances, we find lenders just stop dead at the word ‘pregnancy’ or ‘maternity leave,’” Bryan Greene, HUD’s general deputy assistant secretary for fair housing and equal opportunity, told the Washington Post. “And in many instances, women are planning to go back to work, but lenders don’t make those inquires. They go on the assumptions that women won’t return to work.” The banks have denied wrongdoing in the settlements but say they act out of concern that there will be a loss of income during maternity leave and women often don’t go back to work.

That’s a false assumption in most cases. Six months after a first birth, nearly 60 percent of women will be back at work. More than 70 percent of mothers with young children are in the workforce and nearly half work full time. The idea that mothers don’t work is founded on a time long past: In 1979, less than 30 percent of mothers worked full time. But since then, the typical mother increased her work hours by 150 percent.

The banks are correct, however, to worry that maternity leave can hurt a family’s income. Out of 185 countries around the world, the United States is one of just three — the other two are Oman and Papua New Guinea — that doesn’t guarantee paid maternity leave. Just 12 percent of workers have access to it through work. While Americans are guaranteed 12 weeks unpaid leave under the right qualifications, taking time off without pay can create serious financial hardship, leading a third to borrow money or dip into savings and 15 percent to enroll in public assistance.

Many will end up going back to work afterward and once again have the steady income the banks are looking for when they lend. But paid maternity leave would make things easier for both the lenders and the borrowers and make it even more likely that women would return to their jobs after the birth of their children.