The U.S. Dept. of Housing and Urban Development (HUD) recently announced it will launch multiple investigations into the lending practices of certain mortgage lenders to determine if they illegally denied families mortgages because the mother is pregnant or a family member is experiencing a short-term disability. The action follows a report published last week in the New York Times outlining the lending practices of some lenders which might violate the Fair Housing Act.
HUD's Federal Housing Administration (FHA) requires approved lenders to review a borrower's income to determine whether they can reasonably be expected to continue paying their mortgage for the first three years of the loan. FHA-insured lenders cannot, however, inquire about future maternity leave. If a borrower is on maternity or short-term disability leave at the time of closing, lenders must document the borrower's intent to return to work; that the borrower has the right to return to work; and that the borrower qualifies for the loan, taking into account any reduction of income due to their leave.
HUD also is reviewing Fannie Mae and Freddie Mac's underwriting guidelines to determine if they satisfy the Fair Housing Act, including income verification of persons taking parental or disability leave.
Source: The U.S. Dept. of Housing and Urban Development
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