UNUSUAL DISCRIMINATION CASE

Familial Status – Discrimination based on the presence or the anticipated presence of children under the age of 18.

In my seminars I point out how unusual it is to see cases of family status discrimination. Most examiners don’t look for this problem and most lenders don’t engage in this type of discrimination.

So imagine my surprise when HUD slammed a Houston-based mortgage lender with a big enforcement action for familial status discrimination. The lender was charged with engaging in discriminatory practices against expectant mothers. I am sure the local press came up with some interesting headlines for this story. Based on the same investigation, HUD also cited the Mortgage Guaranty Insurance Corporation for illegal practices related to mortgage insurance.

Lenders cannot inquire about future maternity leave and cannot deny or delay loans for women on maternity leave if they are otherwise eligible for the credit. If an applicant is on maternity leave the lender must document the applicant’s intent to return to work, that the applicant has the right to return to work, and that the applicant qualifies for the loan taking into account any reduction of income due to their leave.

Under the terms of the agreement the lender is required to establish a $750,000 fund to compensate victims. It also agreed to establish a new policy regarding the treatment of applicants on parental leave, including maternity leave.

Is this a one-shot case or the beginning of a pattern of activity by the regulators? Take appropriate action so I won’t be reading about your bank as the next subject of a HUD action. Adopt procedures regarding applicants on parental leave and conduct a training session for your lenders.

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