The U.S. Department of Housing and Urban Development (HUD) is cracking down on lending practices that discriminate against expectant mothers. First, the department announced this week that it had reached a settlement with Houston-based lender Cornerstone Mortgage Co., which HUD accused of unfairly denying a woman a loan because she was pregnant.
In a separate action, HUD is also charging Milwaukee-based Mortgage Guaranty Insurance Corp. (MGIC) with engaging in pregnancy discrimination in issuing mortgage insurance in violation of the Fair Housing Act.
"Mortgage professionals may verify income and other resources and have eligibility standards, but they may not single out women on maternity leave to deny or delay loans that they are otherwise eligible for,’ says John Trasviña, HUD's assistant secretary for fair housing and equal opportunity.
Under the terms of the settlement, Cornerstone (doing business as Cornerstone Home Lending) agrees to compensate Dr. Elizabeth Budde $15,000 based on her claims that she was initially denied a mortgage loan even though she was on paid maternity leave and planned to return to work.
Cornerstone must also create a $750,000 victims' fund to compensate other Cornerstone borrowers who experienced similar discrimination and notify all borrowers who applied during a two-year time frame of their right to seek compensation if they experienced treatment that was discriminatory because a borrower or co-borrower was pregnant or on maternity leave. Cornerstone will have to pay as many as 100 successful claimants a lump sum payment of $7,500 each.
Cornerstone has also adopted a new policy clarifying how it will treat applicants for loans who are on parental leave, including maternity leave, when they apply for a loan.Â
MGIC, meanwhile, is being charged with discriminating against a Pennsylvania family by denying their application for mortgage insurance until the wife returned to work from maternity leave. According to HUD's complaint, in July 2010, MGIC wrote an email summarizing the status of the family's loan: "rec'd updated bank statements along with email from Borrower that states she is on maternity leave….notifying her that we cannot proceed until borrower is back to work full-time."
Last July, HUD launched multiple investigations into the lending practices of certain mortgage lenders to determine if they illegally denied families mortgages because the mother was pregnant or on pregnancy-related leave.