It may be a cliche, but sometimes truth IS stranger than fiction. At least it seems that way. The New York Times is reporting that potential borrowers are being turned down for mortgage loans because they are on maternity or paternity leave. In some cases, those who anticipate being on leave in the near future are also denied loans.
This seems rather unfair. Why would a bank deny a new family the loan to purchase a home?
Many lenders are only lending money to those who have a "guaranteed" income -- those who are employed and have regular paychecks. Maternity leave, even if paid, no longer qualifies as "regular" income for most banks. Some lenders fear that new mothers will elect to remain home and not return to work.
Lenders cannot ask whether a potential borrower is pregnant; they can ask, however, whether a borrower expects a change in income. But even that expected change in income doesn't necessarily disqualify them, according to Fannie Mae. So long as a borrower can show that he or she will have adequate income upon returning to work, there shouldn't be an issue approving the loan.
The lenders claim that one bad loan could bring them down, given the new guidelines for approving them. While this may be the case, it seems clear that they are erring on the side of caution right now. In the meantime, expecting families may want to plan their home purchases accordingly.
At the end of the day, denying a loan simply because a borrower is pregnant is abhorrent. Dressing it up as "smart lending" or "cautious lending" is a semantic game at best.
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