Increasingly, families that are expecting a baby are being denied loans due to a decrease in salary (even though temporary) due to maternity or paternity leave, even when the parent declares an intention to return to work. And no, disability pay received is not being counted toward income.
I learned about families that are expecting a baby have been deemed credit risk or not credit worthy through Melissa Dittmann Tracey, Contributing Editor at REALTOR Magazine. What is most shocking is that when Melissa asked what readers thought of this new trend, only one person commented. I was shocked. Shocked! No one is outraged? Well, I am.
In a climate where buyers are already fearful that they will not qualify or they hear horror stories of fraud, lenders are shooting themselves and Realtors in the foot. Can you imagine if an expecting family was denied a home based on their familial status? Hello, fair housing?
Housing and Urban Development announced this month that they would be investigating claims that lenders are discriminating against expectant 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.”
I realize that this situation is not that cut and dry, and I would support this trend if it was for families expecting that one parent would not return to work, but maternity and paternity leave are normal and are supported by disability pay. It’s a temporary move. This is a shady runaround because they can’t change terms based upon a new baby (which is an added expense), and they can’t categorize it as clearly as a new car or furniture suite purchase, so those participating in this trend will use the income loophole.
Pregnancies and home buying are complicated enough and any lender supporting this is deplorable. Expecting families are a credit risk? Really? This reeks.