Pregnancy & Mortgage Loans

[MrsK]

http://www.nytimes.com/2010/07/20/yo...ref=your-money

I heard a blurb about this on NPR this morning and nearly spit out my coffee. The NPR headline was that lenders are refusing mortgage loans to pregnant women because they may not return to work after the baby is born. I've been looking on line for the full story and found this article. The "may not return to work" statement is made but it seems to me that it's one lender's opinion (or probably more than one lender's opinion but the rest are not stupid enough to say that out loud). It really offended me -- felt like a slap in the face after I checked my e-mails and called in for messages during leave and flew 1500 miles with a 3-month old so I could be at work the minute my maternity leave ended. Also for women like GMW who are bringing their infants to work. I don't usually climb up on a soapbox but the concept of denying loans to pregnant women because the lender assumes she will not return to work is so outdated and unfair.

[scrub-jay]

I can't believe this. Is this even legal?! Argh!!!

[GrayMatterWife]

As long as the banks are looking at it in terms of whether the couple could qualify for the loan based on ONE of their incomes--rather than simply presuming it is the wife who won't work and running the analysis as whether they could qualify based on the husband's income only--I don't really have an issue with it. Banks are entitled to consider the guarantee of income at the time the contract is made. Why should the bank have to bear the risk of making a loan, when the financial circumstances of the borrowers may change? It seems like a reasonable business consideration. Just make the analysis gender-free, and there should be an issue.

Also, I think the banks should be entitled to consider the increased monthly overhead of the family, if both parents continue to work. They will have less disposable income, based on childcare costs. So, they should run that analysis, too: can the couple still qualify if they are spending the anticipated XX number of dollars per month on daycare, etc.

But, you know, this also is a bit of a comment on how de-personalized loans to individuals has become. There was a day, not all that long ago, where one got a loan--in part--because one was known at the bank, was a long-time customer, and was considered a good "character" risk. That was a factor. If banking still had that personalized touch, banks could consider the fact-specific, case-by-case made determinations. If the lender knew the family, knew the wife, knew the husband, the bank would be able to make a better decision based on those particular borrowers.

[scrub-jay]

Also, I think the banks should be entitled to consider the increased monthly overhead of the family, if both parents continue to work. They will have less disposable income, based on childcare costs. So, they should run that analysis, too: can the couple still qualify if they are spending the anticipated XX number of dollars per month on daycare, etc.

The slippery-slope here is the chosen daycare. Most of my co-workers children stay with a family member for free (wouldn't it be great to live close to family? gah!), whereas we are planning to enroll our daughter in a daycare center that is on the pricier side. Others have chosen home daycare (estimates around here were half the cost of the center). But to standardize, the lenders may calculate based on the most expensive option, thereby inappropriately disqualifying applicants. But could lenders ask how much they were planning on spending on daycare?

[MrsK]

Also, why only consider whether the family can get by on one income because they are expecting? Either spouse could loose a job, become disabled, die. . . The next step is denying loans to women of childbearing age because they may become pregnant. Would the bank deny a loan to an older man because he might have a heart attack? Would the bank deny a loan because an older person might retire? There is always a risk that the borrower's financial circumstances can change. Generally, banks look at the borrower's past performance, debt repayment, credit history, prior bankruptcies, and the like to mitigate that risk. Banks generally don't base their decisions on conjecture about what decisions the borrower might make for their family and certainly not on the presumption that a pregnant woman will stop working indefinitely.

[MarissaNicole]

Absolutely horrible...... but I am not surprised..... getting our mortgage was a bit funny.... in fact we had to do it entirely on my salary even though DH had a job starting July 1, 2010, that wasn't enough for them. And I couldn't let them know that I was going to look for another job. It was entirely dependant on MY current job. They didn't care about any future employment, so I can see why they would be hesitant for somone ON maternity leave, but being pregnant seems a little overboard. Gotta love how we went from one extreme of granting loans to now being discriminatory to CYA. Horrible.

[ladymoreta]

I agree that it's offensive from my perspective as a SAHM, also. The decision to SAH isn't one that is made lightly, and to assume that a woman would choose to leave her job and default on her mortgage implies that she's... well... not that intelligent. I know mothers don't always plan to SAH, but if they change their mind and decide to after the baby is born, usually they'll make sure they can at least pay their bills.

I also agree with GMW, though - banks do need to carefully consider the fact that either person could lose their income.

[scrub-jay]

Should we then exclude anyone with an at-will contract?! I mean, they could theoretically lose their job in the future. Gah, this aggravates me, I guess I should step aside.

Unfortunately lenders (and the rest of us) learned the hard way that some people don't plan so well for life's contingencies and/or prioritize paying their bills. I think it's great that banks are trying to look more carefully at the big picture and not rubber-stamping loan applications. I don't know the statistics, but it seems reasonable to assume that a fairly significant portion of expectant parents reduce their net income after baby is born. It makes sense pregnancy would be a red flag-- along with any other indicators of potential reduction of income or assets.

[MrsK]

The woman in the article was a doctor and her husband was a graduate student. She was about as likely to quit her job as she was to be struck by lightening.

Re: at will employment. In most States all employees are "at will" unless they have an employment contract and few employers are willing to enter into employment contracts that waive the at will default. No one would be able to guaranty that they'd have income for 3 years as described in the article so no one would get loans. . . and even those with employment contracts cannot guaranty that their employers would be solvent three years later.

I bought my first home as a single woman and paid the mortgage myself. More than seven years later, I'm married with a baby and living 1500 miles from said home and I still pay the mortgage. Life changes quickly. If my lender had considered the big picture, the bank would not have made that loan which wouldn't have been good for me or for the bank.

The woman in the article was a doctor and her husband was a graduate student. She was about as likely to quit her job as she was to be struck by lightening.

As for the situation in the article, you're absolutely right. I would hope a bank looking at that couple's circumstances would be assured that she would return from maternity leave. I'm not saying banks are doing a fair and adequate job of scrutinizing these people, just in principle, I think it's reasonable.

[MrsK]

And another thing (you can tell I'm really fired up) the collateral is supposed to protect the lender from life's contingencies. They should be looking at the value of the property to determine whether it will be adequate to satisfy the loan in the event that the borrower's circumstances change. That's the way mortgages are supposed to work.

[scrub-jay]

Re: at will employment. In most States all employees are "at will" unless they have an employment contract and few employers are willing to enter into employment contracts that waive the at will default. No one would be able to guaranty that they'd have income for 3 years as described in the article so no one would get loans. . . and even those with employment contracts cannot guaranty that their employers would be solvent three years later.

You must have missed my overwhelming cynical sarcastic tone on this - there really should be an emoticon for it. I'm fired up on this with you MrsK!!

[HouseofWool]

So, what are my odds of getting a loan as a single mother? Hmm, at least my parents are happy to co-sign. I think it is mostly because they want their house back.

[scrub-jay]

So, what are my odds of getting a loan as a single mother? Hmm, at least my parents are happy to co-sign. I think it is mostly because they want their house back.

I don't know Kris, you might be just fine with your rock star new job!!