HUD probes lender treatment of new moms

The Department of Housing and Urban Development said it’s launched "multiple investigations" following a report in the New York Times suggesting that some mortgage lenders are denying credit to borrowers because of a pregnancy or maternity leave.

The story found that some lenders won’t count disability payments new mothers receive while on maternity leave as income, because those payments aren’t considered a stable source of income by Fannie Mae, Freddie Mac and the Federal Housing Administration.

A spokeswoman for Fannie Mae told the Times that a doctor’s letter with a return date to work and a letter from the mother’s employer stating her expected salary when she comes back should be considered sufficient proof of stable income. But some lenders are requiring that families reapply for their loan after the mother returns to work.

"Lenders have every right to ascertain the incomes of families to determine whether they are eligible for a mortgage loan but they have no right to use a pregnancy or a short-term disability as a cause to deny that family a mortgage they would otherwise qualify for," Housing Secretary Shaun Donovan said in a press release.

"Having a child should be a time for a family to celebrate and must not be a cause for unfair lending practices."

The Fair Housing Act prohibits discrimination in lending based on race, sex, disability and familial status including pregnancy or children in the family.

In a separate action, HUD said on July 15 it had charged a Denver condominium association with violating the Fair Housing Act by attempting to require that heads of households be at least 50 and barring children under 17.

The Fair Housing Act prohibits condo associations and others from discriminating against families with children unless the housing is exclusively designed for senior citizens.

Housing may qualify as housing for older persons if it meets certain requirements, including that 80 percent of the units have at least one resident 55 or older and that it publishes policies that demonstrate a consistent intent. HUD said Windsor Gardens Association does not meet the federal definition as housing for seniors only.

Also this month, a HUD administrative law judge ordered an Iowa landlord to pay $52,150 in damages and civil penalties for allegedly threatening to evict a single mother of three because she filed a housing discrimination complaint.

In yet another Fair Housing Act case, HUD said last week it had charged two Cleveland-area landlords — one a licensed real estate agent — for allegedly refusing to rent a house to a woman because she was Hispanic.

HUD alleges that Kathy Parker and Deryl Gibson, the African-American owners of the Warrensville, Ohio, house, asked the woman, "Why do you want to live in a black neighborhood," and warned her she might not feel comfortable there.

In other actions, HUD said the Federal Housing Administration’s Mortgagee Review Board has withdrawn FHA approval for a period of one year for 905 lenders who failed to comply with the Department of Housing and Urban Development’s annual recertification requirements.

Another 147 lenders who missed the deadline for recertifications but are now in compliance were allowed to pay a $3,500 civil penalty without admitting fault or liability, HUD said in a Federal Register notice announcing dozens of administrative actions.

The review board has taken nearly 1,500 administrative sanctions against lenders this year, including reprimands, probations, suspensions, withdrawals of approval, and civil money penalties.

Among the largest settlements, on March 23, the Board entered into a $413,500 settlement agreement with Melville, N.Y.-based Franklin First Financial Ltd., requiring Franklin First to to indemnify HUD on 31 loans and reimburse fees to 78 borrowers without admitting fault or liability.

Franklin First allegedly failed to ensure that loan applications were taken and processed by Franklin First employees and approved loans where borrowers failed to meet HUD’s minimum credit requirements.

On Feb. 17, the Board entered into a $700,000 settlement agreement with CitiMortgage Inc. to resolve allegations that CitiMortgage did not report all delinquent loans to HUD’s Single Family Default Monitoring System in a timely fashion.

On Feb. 2, the Board entered into a settlement agreement with PrimeWest Mortgage Corp. of Lubbock, Texas, requiring the company to pay a $168,500 civil money penalty without admitting fault or liability.

PrimeWest allegedly permitted a third-party to originate HUD/FHA-insured mortgage loans, failed to document a borrower’s income in accordance with FHA requirements, and charged a borrower an unallowable tax service fee.

On Dec. 14 the board entered into a settlement agreement with Equitable Trust Mortgage Corp. of Baltimore, Md., requiring Equitable to pay a $277,500 civil money penalty and refund broker fees charged to borrowers totaling $147,589 without admitting fault or liability.

Equitable was accused of charging borrowers excessive loan-origination fees that included both a broker fee for loans it originated and also an origination fee.