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HUD Reaches $5 Million Settlement With Wells Fargo on Maternity Discrimination

NationalMortgageProfessional.com
Oct 10, 2014

The U.S. Department of Housing & Urban Development (HUD) has announced that it has reached a $5 million settlement with Wells Fargo Home Mortgage resolving allegations that the lender discriminated against women who were pregnant, or had recently given birth, and were on maternity leave. Under its authority to enforce the Fair Housing Act, HUD has conducted an intensive campaign to end maternity leave-related lending discrimination. Since 2010, 190 maternity leave discrimination complaints have been filed with HUD, resulting in more than 40 settlements for a total of nearly $1.5 million, prior to today’s settlement.

The Fair Housing Act makes it unlawful to discriminate in real estate related transactions, including the provision of home mortgage loans, on the bases of race, color, national origin, religion, sex, disability, or familial status.

“The settlement is significant for the six families who had the courage to file complaints, and for countless other families who will no longer fear losing out on a home simply because they are expecting a baby,” said HUD Secretary Julián Castro. “I’m committed to leveling the playing field for all families when it comes to mortgage lending.  These types of settlements get us closer to ensuring that no qualified family will be singled out for discrimination.”

In the settlement, the lender will distribute a total of $165,000 among six affected families; create a fund with at least $3.5 million to compensate other Wells Fargo applicants who experienced discrimination because they were pregnant or on maternity leave when they applied for a loan; and pay as many as 175 claimants  $20,000 each. If there are more than 175 successful claimants, Wells Fargo will replenish the fund with $1.5 million, and pay each of the next 75 claimants $20,000 each. Claimants beyond 250 will share a prorated share of $5 million. Wells Fargo will also change its underwriting guidelines when it comes to evaluating mortgage loan applications from those on maternity leave, ensuring they are not discriminatory.

This settlement resolves complaints filed by six families from across the nation—including Nevada, Nebraska, Texas, Arizona, and California. A complaint from HUD Assistant Secretary Gustavo Velasquez on behalf of other families is also part of the settlement. Each complaint alleged that Wells Fargo’s underwriting policy for its FHA-insured home mortgage loans and the implementation of its policy violated the Fair Housing Act by discriminating against women on maternity leave. The complaints included allegations that Wells Fargo discriminated in lending services in connection with home sales, by making loans unavailable based on sex and familial status; or by forcing women applicants to sacrifice their maternity leave and return to work prior to closing on their loan; and by making discriminatory statements to and against women who were pregnant or who had recently given birth.  Women applicants who sacrificed their maternity leave in order to ensure that their loan closed reported emotional distress at the loss of time with their infants and complications that arose in finding emergency child care and establishing the ability to nurse. 

Since 2010, HUD has focused on ending maternity leave-related lending discrimination. One of HUD’s first cases resulted in a Department of Justice settlement with Mortgage Guaranty Insurance Corporation (MGIC), which established a $511,250 fund to compensate 70 people, and pay a $38,750 civil penalty. Other settlements include a November 2013 settlement with Bank of America for $45,000 and a 2011 settlement with Cornerstone Bank for $750,000.

In addition to the monetary relief announced today, Wells Fargo agreed to implement new Temporary Leave Underwriting Guidelines and issue instructions to its staff about how to implement the guidelines. The new guidelines clarify how Wells Fargo underwriters must evaluate and process mortgage loan applications from applicants on parental leave, including maternity leave, when they apply for a loan.

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