HUD looking into report that lenders deny mortgage loans to pregnant couples

Written on July 23, 2010 – 1:24 pm | by Alicia Ross

The HUD reports that denying a mortgage loan to pregnant couples is illegal and will be stopped

Pregnant couples across the U.S. that are trying to purchase a home may be shocked at a report that came to light which stated that many lenders are refusing to underwrite mortgage loans for expectant parents. Lending companies contend that a temporary lapse in income due to maternity leave or parents taking time off to care for their newborn makes them a risk, according to the New York Times.

After the release of the report, the U.S. Department of Housing and Urban Development announced its plans to launch investigations into the practice, citing that it is illegal to refuse loans based on a woman’s pregnancy status.

“Lenders have every right to ascertain the incomes of families to determine whether they are eligible for a mortgage loan but they have no right to use a pregnancy or a short-term disability as a cause to deny that family a mortgage they would otherwise qualify for. Having a child should be a time for a family to celebrate and must not be a cause for unfair lending practices,” said HUD Secretary Shaun Donovan.

According to its statement, HUD also noted that it is currently reviewing the underwriting standards of Fannie Mae and Freddie Mac, including their income verification standards surrounding maternity and parental leave. Historically, the mortgage guarantors have always mandated that borrowers not only have enough income to satisfy the loan requirements on the day they close on the property, but to also confirm they will have sufficient income to meet their mortgage requirements for a three-year period.

Mortgage lenders nationwide have been forced to tighten their underwriting standards in an effort to avoid another subprime mortgage crisis, but some analysts agree that they may be going overboard.

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