HUD launches lending discrimination probe – NMP Skip to main content

HUD launches lending discrimination probe

Jul 22, 2010

The U.S. Department of Housing & Urban Development (HUD) has announced that it will launch multiple investigations into the lending practices of certain mortgage lenders to determine if they illegally denied families mortgages because the mother is pregnant or a family member is experiencing a short-term disability. The action follows a report published this week in The New York Times outlining the lending practices of some lenders which might possibly violate the Fair Housing Act. "Denying a mortgage to people just because they're having a baby is flat wrong," said u.s. Vice President Joe Biden, Chair of the White House Task Force on Middle Class Families. "Mothers on maternity leave have jobs, they have income, and they shouldn't have to lose their deal to close on a house because they had a baby. I applaud HUD for taking action on this practice that could potentially affect untold numbers of families." HUD Secretary Shaun Donovan said, "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." HUD enforces the Fair Housing Act which prohibits discrimination in lending based on sex, familial status (pregnancy or children in the family), or disability. The Act protects consumers from being discriminated against based on a borrower's maternity leave if the borrower can demonstrate that she intends to return to work and can otherwise continue to meet the income requirements to qualify for the loan. A published report in The New York Times indicated that some mortgage lenders may be denying credit to borrowers because of a pregnancy or maternity leave. As a result, HUD's Office of Fair Housing & Equal Opportunity (OFHEO) is opening multiple investigations into the practices of lending institutions to determine if they are violating the Fair Housing Act. "This report is profoundly disturbing and requires immediate action," said John Trasviña, HUD's Assistant Secretary for Fair Housing and Equal Opportunity, the office that will be directing these investigations. "Lenders must not carry out due diligence responsibilities in ways that have the practical effect of discriminating against recent or expectant mothers." HUD's Federal Housing Administration (FHA) requires its approved lenders to review a borrower's income to determine whether they can reasonably be expected to continue paying their mortgage for the first three years of the loan. FHA-insured lenders cannot, however, inquire about future maternity leave. If a borrower is on maternity or short-term disability leave at the time of closing, lenders must document the borrower's intent to return to work, that the borrower has the right to return to work, and that the borrower qualifies for the loan taking into account any reduction of income due to their leave. Meanwhile, HUD is currently reviewing Fannie Mae and Freddie Mac's underwriting guidelines to determine if they satisfy the Fair Housing Act, including income verification of persons taking parental or disability leave. For more information, visit www.hud.gov.
About the author
Published
Jul 22, 2010
Checkr Buys Truv To Move Mortgage Verification Beyond Documents

The acquisition adds consumer-permissioned payroll and banking data to Checkr’s mortgage platform while lenders confront increasingly convincing fabricated financial records

Aug 19, 2026
IMBs Make Most Mortgages. CHLA Says It’s Time They Got FHLBank Access.

As FHFA moves to give Federal Home Loan Banks more flexibility, the trade group is renewing its push to give qualified independent mortgage banks access to FHLBank membership and liquidity

Insuring The Risk To Lenders At Closing

Traditional protections like title insurance and closing protection letters may leave lenders exposed to significant settlement, funding, and fraud-related losses

CHLA Uses Trump Mortgage Order To Renew Push For LO Comp Reform

Community lenders want more flexibility over employee compensation, closing-cost estimates, down payment assistance, and federal supervision of smaller IMBs

Servicers Begin Testing Systems Ahead of VA Partial Claim Deadline

VA lenders and servicers have until Nov. 28 to implement the new loss mitigation waterfall and Partial Claim Program

ROAD Act’s Housing Incentive May Be Too Small To Move Supply

Realtor.com finds the median city risks losing only about $84,000, although the policy could carry more weight in supply-starved Northeast and Midwest markets