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Subscribe to RSSAs if expecting parents don’t have enough to worry about, now comes word that pregnancy has become a potential deal-breaker when it comes to getting a mortgage.
“Lenders are saying: ‘We need to see income, and we need to see income not just now, but that will actually last for the next three years,’ ” TODAY financial editor Jean Chatzky said Wednesday.
As a result, banks are taking a hard look at couples with maternity or paternity leave, fearing they won’t have enough income to make their payments.
What do you think? Watch the video below, and weigh in if you think it's fair for a couple to be denied a mortgage simply because they are expecting a baby.
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Makes total sense.
You are an idiot. Now THAT makes total sense.
Isn't that illegal?
To deny a loan on the basis that a couple that is expecting a child makes no sense. This is discrimination!!!
These bankers cannot predict the future either, to figure out if a person or couple will lose their jobs, become terminally ill, have an accident, become disabled and so on, thus rendering them unable to pay their loan. Expecting a child does not necessarily mean that one will not be able to pay a loan. Again: it is discrimination.
Ridiculous. If anything, most couple double up efforts to save and remain solvent once they start a family.
Yet another form of discrimination. Women are discriminated against in the workforce because of their childbearing potential, and now banks don't want to lend money to pregnant women because they "might" not go back to work? Disgusting. Has nobody heard of the stay-at-home-dad? The value this country and society places on women is absolutely disgusting.
Does anyone at the bank consider that once a woman goes back to work a significant portion of her salary will now go to childcare expenses? Seriously, it is the responsibility of the family applying for the loan to ensure that they can afford, in any scenario, the home they are buying, whether one person gets laid off or decides to stay home. It is not the responsibility of the lender to decide that pregnancy/children are enough of a reason to deny a loan application.
According to the Equal Opportunity Act, lenders are in violation of federal law that protects borrowers from lenders using family status as a determining factor in loan decisions. It would be a tragic set back to allow this to happen, and destroy the American Dream for young couples trying to provide for their families. Mortgage lending is risky by nature, and notwithstanding our best efforts to ensure repayment, unforseen circumstance in someones life equally effects the ability of a family to repay their loan obligations.
Of course it is discrimination. But is it illegal discrimination? Evidently not. We all discriminate hundreds of times a day, whenever we make a choice.
In this case, the lender is being foolish. There are many unpredictable ways that income can be interrupted. Just require a down payment large enough to cover any possible drop in value of the mortgaged asset; then place restrictions in the contract to prevent additional mortgages that might push the sum of outstanding loans above the value. The lender is protected and the growing family has access to a house they want to have and for which they are willing to pay. The family has a stake in it - their downpayment.
Down payment size does not ensure that a foreclosure will not happen. Many people who HAD large down payments, and HAVE the ability to pay, are walking away simply because they have become "upside down" and a decline in market vales have eroded their equity. They can buy the same house down the street right now for considerably less money then they owe on their current home. They do a "buy and bail" Buy the new one, then walk away from the other home.
Yes, it's illegal.. familial status includes pregnancy and childbirth... This is straight from the HUD website:
In Mortgage Lending: No one may take any of the following actions based on race, color, national origin, religion, sex, familial status or handicap (disability):
This is illegal - Federal Regulations will probably want to know what banks/lenders are committing these acts.
Federal Regulation - ECOA - Equal Credit Opportunity Act - PROHIBITS - this type of discrimination.
http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea08.shtm This is an easy read on discrimination LAWS. There are other ACTS through the years that have "over laments" to the basic ECOA ACT.
If this is the direction we are heading in the lending industry, one would need to evaluate the clients place of employment (in case the company or area they live in is in a "depressed" employment area. you can't prove the employee would have a job there for 3 years.
Who can guess if the husband could possibly go on family leave instead of the wife - this is more common now days than not.
Leave it to bankers and lenders to stir the pot once again.
Rachel C
Oregon
it is a fair question. Are both spouses going back to work or is one staying home for more than the typical 12 week leave? If they state yes, both are going back to work, then the bank should take it at their word.
If one is staying home, then the loan application and payment amount should be based on one income. Wouldn't the couple want it that way? Don't they want to be able to afford the mortage?
What? They are just doing it to be mean?
If you want to lend -fine. If they don't - they don't.
This is not discriminatory. The banks have every right (and responsibility) to recheck credit scores and income right before closing. There is a often a long gap between qualifying and closing and circumstances change. If a pregnant woman is on maternity leave, then her income is reduced. Same as if the husband was injured or lost his job. A reduction of income, for any reason, changes the qualifications of the initial loan application.
The bank has every right to make sure there is sufficient income to cover the mortgage payments. Would a couple want their loan based on two incomes then one of them decides to stay home after the baby? Then what they whine because they are losing their home because the mortgage payments are too high? It's not discrimination. It's good financial practices.
Do they not want a child to have a roof over their head??? This is bogus!!!
you nailed it sarah - lenders simply do not want children to have roofs over their heads-how simple minded can you be? Lenders must assess risk and loan or not to loan, as well as set the interest rate of the loan, based on that assessment. The current housing crisis happened because risk was not properly assessed.
An apartment is a roof over ones head, too.
Wow...why doesn't everybody just take a deep breath and sit down for a minute. It's amazing how quickly we jump to conclusions without actually thinking through the situation. Have we already forgotten that the current housing mess was largely caused by banks/lenders giving loans to people that had little or no prospect of paying them back? Now, all of a sudden you want banks/lender to do that again? Have you lost your minds? Pregnancy is not the issue here...ability to pay back a loan is the issue. Pay attention, and think things through....
Tricky!
What's ironic is that a pregnancy is often what spurs a home buying decision. It spurred my first house. When we found out that my wife was pregnant, we didn't want to have the baby in an apartment ... we wanted a house!
We were fortunate, I guess, since we applied and received a loan based solely on my income. I can definitely see how a loan officer, in today's economy, would at least take a pregnancy into consideration. It's not only for the benefit of the bank, but for the expecting couple as well.
If there is a large gap in affordabilty of payments with 1 income vs. 2, it's probably not a good idea to buy a house in that price range. Isn't that how we got into this whole mortgage mess in the first place?
Of course, to just deny a mortgage out-of-hand because the couple is expecting is ludicrous.
Unreal,These banks or the top officials making the rules are complete idiots.It seems as if they are pulling at strings,trying to not take any chances.
1- If you have the credit for the house, you most likely have a job with maternity leave to back your lost pay.
2nd- If not the standard maternity leave, family leave act will cover a couple weeks of time off.
But FMLA and most maternity leaves are not paid leaves. The bank, rightly so, is looking at the time of the closing and the income that the borrowers used to qualify is no longer the same level.
This is icing on the cake in our world today. If you are of child bearing years, insurance companies deem you as a pre-existing condition and can deny you coverage.
Now we have banks invading your "CHOICE" to be a parent and by that Choice, dening you a loan.
Way to go society, let's just go back 40 years and declare all woman inferior.
Another reason to get the government involved, to STOP the discrimination against woman!
no one says a woman has to have children. Many pregnant woman want things handed to them on a silver platter. I wish more women would take their financial situations and jobs into consideration before getting pregnant.
I'm sure MANY pregnant women would love to see sheplover's head on a platter for that comment about "handed to them on a silver platter". That's BS. I work in healthcare and am amazed how well women deal with it as pregnancy is a demanding, often-risky condition.
Another thing about slover's comment - it heavily implies that childrearing is ENTIRELY women's responsibility. MORE BS.
Their financial situation is about to change dramatically, it is definitely something lenders should worry about. Same as if they are about to make another large purchase, kids cost money, usually more than parents expect. They do not yet know what their financial situation will be, its a liability for lender to give them a loan. For parents to do the best for their child, they should wait to be in a solid financial situation for a period of time since the child or years before. To do the best for the loan company they should make sure the parents do the above rather than foreclose on them when they can't make a payment a year down the road because of the change in their income and expenses.
Free housing a right - yes? Food, education, a good job. Retirement and medical. Education and vacations. All human rights to be provided by rich people.
Stop discriminating against people in need. LOLOLOL
If the woman's income is a part of the mortgage application, I think it is fair. Why not base your mortgage decision on the man's income during child bearing years and move on to a larger home after your children are born?
Discrimination? So the bank wants to be sure that they get paid back. If the pregnant woman and her husband don't want the problems, they can just pay all cash for the house. Otherwise, the bank would be derelict in lending money that has a greater risk of default. I am completely behind the bank on this one.
I do not think that being a female or being pregnant is the main issue; it is the fact the they are perfoming a complete analysis of the risk involved before they make a decision on the loan. If you think about it, would you loan money to someone who may not be able to pay you back? I just bought a home last week in San Diego California; I am a financial advisor and my FICO is in the 800's, I make over 100k a year and I put a substantial amount down as payment & before the final approval went through, I left as though I went through a painful colonoscopy. In light of bad business decisions lenders made a few years ago, they are perfoming their due-dilligence.
I disagree with this method every bit. Just because a woman is pregnant does not mean that she is not able to make house payments.
I am planning to add to my family as we speak. I am also looking into buying a house. My husband and I have done our homework well, and we are certainly able to handle both at the same time.
If we were denied or otherwise given worse conditions towards our loans based on pregnancy, I would be very disgruntled by that. It is very discriminatory.
This kind of decision should be left between the partners involved and the real estate agent, who are better able to determine financial stability and goals based on individual circumstances.
you have to wonder ... exactly WHO WILL they make a loan to ??????
As a veteran of over 40 years in the lending business I call recall that FHA once had a policy (in the late 60's, early 70's) of discounting a wife's income by about 50% . . . "she might become pregnant in the future you know . . . ."
It seems we're coming full circle back to that same crazy discriminatory thinking. What's next, redlining again?