The Pregnant Woman, The Newest Lending Credit Risk: Discrimination or Fair Lending?

by Rich Vetstein on August 10, 2010 · 2 comments

in Housing Discrimination, HUD, Massachusetts Real Estate Law, Mortgages

By Karen Rabinovici, UConn Law ’12

It seems more outdated than hair scrunchies, something we witnessed years ago: discrimination against pregnant women seeking mortgage loans. Apparently it’s still going on and worse than ever which is why the U.S. Department of Housing and Urban Development (HUD) is investigating numerous cases of alleged pregnancy discrimination in lending. The New York Times recently wrote about it: Seeking a Mortgage, Don’t Get Pregnant.

Spurred by the financial crisis, lenders have created more stringent guidelines for granting loans to borrowers looking to buy homes, and have zoned in on pregnant women, essentially deeming them to be liabilities. Lenders are equivocating maternity leave with unemployment, which results in automatic disqualification or reduced buying power for a loan. Although some women on maternity leave can be entitled to temporary disability insurance, this disability insurance may not be used as qualifying income because it is allocated for a period of time less than three years. Women who are on maternity for only a few weeks are also affected, so the range of women denied loans is vast.

In the past, maternity leave was considered a break from work and was not taken into account when considering whether or not to grant a loan. In this financial climate, however, maternity leave has come to be viewed differently – as complete unemployment. So, lenders will not approve a loan until the mother is officially back at work. This subjects women to more red tape:  providing documents from their employers specifying the length of their maternity leave and the date of their return to work, as well as letters from their doctors, and other information deemed relevant.

These new guidelines have resulted in too many claims of discrimination from pregnant women to ignore, and thus has resulted in the HUD investigation. If HUD concludes that discrimination against pregnant women and new mothers is indeed taking place, this could be a violation of the Fair Housing Act, one purpose of which is to protect families.

Some results of all this are that families are forced to wait until the mother returns to work (possibly rushing maternity leave), families are altogether giving up on buying homes, or families are purchasing homes that they can afford on one salary.

Families are feeling punished for having babies, and the irony that most families are buying new homes in the first place because they are expecting children does not fail to come through.

While tougher standards for approving loans have become an obvious step to take by lenders, these types of resulting consequences walk a dangerous line between what needs to be done, and unfair treatment towards one group of people. In either case, the allegations of discrimination against pregnant women reek of the sexism that was rampant in the professional world decades ago.

What do you think? Are pregnant women being treated unfairly, or are they indeed a liability to lenders because of the income gap resulting from their maternity leave?

Related Articles:

Pregnant Women Losing Out On Home Loans, Change.org

Pregnant Women Denied Loans? Realtor.com

  • Campbell

    I think this is an excellent article, and great debate material. My stand on it is this: Pregnant women are being mistreated in SEVERAL ways already, why put a loan denial for a loan on top of that. The average woman never gets the chance to advance in her job appropriately when she has children, because the average woman stops working to raise her family. Women are now rushed out of hospitals with their new babies, not given the appopriate information to help new mothers, and get home sore, and expected to immediately care for their child. It takes time to heal, and when you have to rush back to work still in pain, deprived of sleep, and learning to raise your child just to get a loan, it says something about our society and how we view our citizens. But it’s always been about money right? So I guess new children and mothers will always suffer. Babies for being born, and mothers for daring to help populate the world. How dare we want kids.

  • Sean O’Brien

    Good article Karen. However, I think it is important to note that this treatment (where it is applied rationally) is not “treating pregnant women unfairly” but rather is applying stricter approval standards to an applicant’s different employment status. I agree that it is ridiculous to discriminate in cases where that applicant’s change in status is clearly temporary and the applicant’s job security can be confirmed. However, where that type of confirmation can’t be provided I think it makes perfect sense to treat that applicant differently than an employed applicant. Employment status is obviously a key part of the loan approval process, and where the continuing employment of an applicant is in any way questionable then it will obviously raise red flags.

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