Lenders settle discrimination claims by new, expectant moms

Settlements include protections for women on paid maternity leave

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Lenders can’t deny mortgage loans to women solely because they are pregnant or on temporary maternity leave, federal regulators said in announcing settlements with two lenders who were accused of doing so.

The Department of Housing and Urban Development (HUD) said Irvine, Calif.-based Home Loan Center Inc. — better known to consumers as Lending Tree Loans — will pay $15,000 to a woman who claimed her application to refinance her mortgage was denied because she was on maternity leave.

HUD said Nashville, Tenn.-based Magna Bank will pay another woman $14,085 for allegedly telling her that she would be required to return to work before her loan application could close.

Both lenders denied that they had violated the Fair Housing Act or any other law, saying they settled the allegations to resolve the claims against them.

According to the settlement agreement with Magna Bank, an expectant mother planning to go on maternity leave claimed that she was told that her loan had been approved, but that she would have to return to work before her loan could close. Because of the delay, the woman "lost a potential housing opportunity," the settlement said.

Magna Bank maintained that it never denied the woman a loan, and also asserted that it had no record that the alleged victim had a fully executed contract to purchase a home. The bank maintained that "incorrect information was inadvertently communicated" to the woman.

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Home Loan Center also denied "any violation of law" in its settlement agreement.

But the lender confirmed that it had "developed a new procedure document clarifying that an applicant’s maternity leave will not bar the applicant from obtaining a loan if the applicant can demonstrate that she can continue to meet the income requirements to qualify for the loan, and sets forth the rules governing temporary leave income, including maternity leave."

Magna Bank also agreed to adopt revised underwriting rules "to ensure nondiscrimination in underwriting loans based on an applicant’s status as pregnant or as a parent, or an applicant taking pregnancy, maternity or parental (including adoption) leave."

Last year, HUD announced a settlement with Houston-based Cornerstone Mortgage Co. that created a $750,000 fund to provide payments to alleged victims of similar discrimination.

The settlement came on the heels of a 2010 report in the New York Times that found some lenders were refusing to count as income the disability payments new mothers receive while on maternity leave from work.

Lenders claimed the payments weren’t considered a stable source of income by Fannie Mae, Freddie Mac and the Federal Housing Administration.


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