The U.S. Department of Housing and Urban Development plans to launch multiple investigations to determine if certain mortgage lenders are denying loans to expectant mothers, new parents, and those on temporary disability.
The move came after a New York Times article exposed the practice, which may violate the Fair Housing Act.
HUD enforces the Fair Housing Act, which prohibits discrimination in lending based on sex, familial status, and disability.
Whether expectant or not, a borrower has the right to a home loan so long as they can demonstrate the ability to afford it, using measures like debt-to-income ratios and the like.
The FHA requires its approved lenders to review a borrower’s income to determine if they can make mortgage payments for the first three years of the loan, though FHA-insured lenders cannot inquire about future maternity leave.
If a borrower happens to be on maternity leave or short-term disability at the time of loan closing, lenders must document the borrower’s intent to return to work and that they qualify for the loan, taking into account any reduction in income due to their leave.
HUD is also reviewing Fannie Mae and Freddie Mac’s underwriting guidelines to determine if they meet Fair Housing Act requirements.
“Denying a mortgage to people just because they’re having a baby is flat wrong,” said Vice President Biden, Chair of the White House Task Force on Middle Class Families, in the release.
“Mothers on maternity leave have jobs, they have income, and they shouldn’t have to lose their deal to close on a house because they had a baby. I applaud HUD for taking action on this practice that could potentially affect untold numbers of families.”