Pregnancy Leave Puts Mortgage in Doubt
Planning to take time off for pregnancy or to care for a newborn may jeopardize your chances of getting a mortgage, reports the New York Times. Lenders attribute their reluctance to lend to new or expectant parents on new rules laid down by government mortgage giants Fannie Mae and Freddie Mac. The rules address the overall lax credit standards that were partly to blame for the mortgage meltdown.
- Time off for pregnancy or newborn care can leave an income gap
- Lenders strictly scrutinize disability income and return-to-work plans
- Laws against pregnancy discrimination don’t cover income-based lending decisions
Stricter Mortgage Rules, Lenders More Conservative
Lenders say they are just complying with new standards for verifying income and making sure borrowers qualify for loans. This year Fannie Mae and Freddie Mac have forced lenders to buy back more loans that failed to meet their underwriting standards. This has caused lenders to take a more conservative approach in counting borrowers’ income.
Lenders say they are not discriminating against pregnancy, but against income. Borrowers have to show they will continue to have enough income to safely pay their mortgage while one parent takes time off. The Equal Credit Opportunity Act prohibits lenders from discriminating against gender and marital status. It also bars lenders from asking about your plans for having or raising children. Lenders can ask questions about expenses related to your dependents.
The federal government took a stance against pregnancy discrimination in 1978. The Pregnancy Discrimination Act provides that discrimination due to pregnancy, childbirth or related medical conditions is unlawful sex discrimination. It only applies to employment, not borrowing.
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