In midst of a handful of settlements, the Department of Justice and the Department of Housing and Urban development HUD) is making it very clear that banks are not to discriminate against pregnant women or women on maternity leave.
Banks have made a habit out of denying women who are on maternity leave mortgages—mothers on leave are risky and pose a threat to household income. As Kenneth Harney at LA Times puts it:
When a borrower or co-borrower is on maternity leave or expected to be on leave, mortgage companies assume that the household income may decline for an extended period, or the woman may not return to the same employment and salary, thereby increasing the risk of delinquency or default.
In a recent settlement, a couple's application for a mortgage was denied by Mountain America Credit Union in Utah because the wife was on maternity leave—they were told they could come back and reapply "only when the wife returned to work and received a paycheck."
While the banks who practice this discrimination like Bank of America, PNC Mortgage, Cornerstone Mortgage and MGIC claim no wrongdoing, the DOJ and HUD have a very different take. They found that such discrimination violates that Fair Housing Act, which prohibits direct providers of housing (ranging from landlords to lending institutions) from discriminating against people based on race, sex, and familial status among other things.
Kristin Roww-Finkbeiner, executive director of the advocacy group MomsRising chalks the discrimination up to obsolete notions of women in the work place:
"It's ridiculous," Rowe-Finkbeiner said. "Three-quarters of moms are working, many of them at more than one job," because they know the income they earn is essential for the economic support of their families, including paying the mortgage.
Data from the Census Bureau shows that mothers return to work much more quickly after the first birth, 59% of women returned to work within three months of giving birth, although pre-pregnancy employment plays a considerable role. In general, mothers are bringing in more money than they used to, and more working moms prefer full-time work.
But apparently that's not all that relevant when applying for a mortgage. Bryce Covert at Think Progress points out that the huge lack of paid leave plays a key role in the situation:
If all workers were guaranteed a period of paid family leave for a new baby, lenders wouldn't have to be wary about giving women loans. It would also boost the share of women who return to their jobs, as those who have access to paid leave are more likely to return to work than those who don't.
Of course it's still disheartening to know that mortgage companies would rather take the hit and pay the settlement than admit that their practices are based on outdated assumptions. Hopefully one day, mothers won't be seen as a liability or someone with a condition, but a person just trying to buy a home.