Bankster Lenders Discriminate Against the Pregnant

Just when you think Banksters couldn't have any more egg on their faces--or whatever that viscous stuff is--they come up with a new outrage.

Here's a NY Times story about banksters and mortgages for the pregnant--long story short, if banksters find out you're pregnant, they'll screw up your mortgage! Wow!

Mortgage lenders are taking a harder look at prospective borrowers whose income has temporarily fallen while they are on leave, including new parents at home taking care of a baby. Even if a parent plans on returning to work within weeks, some lenders are balking at approving the loans.

“If you are not back at work, it’s a huge problem,” said Rick Cason, owner of Integrity Mortgage, a mortgage firm in Orlando, Fla. “Banks only deal in guaranteed income these days. It makes sense, but the guidelines are sometimes actually harsher than they need to be.”

Back in the slapdash days of easy credit, lenders were more likely to overlook the fact that a parent was out on maternity or paternity leave. But now that lenders have become more conservative, they are requiring new parents to jump through more hoops to prove their income will be enough to cover the mortgage.

So before some prospective parents start spending their Sundays at open houses, they should be prepared to deal with some complications. They may have to delay the purchase, deal with the banks’ bureaucracy (and requests for extra paperwork) or buy a home they can afford on one salary.

“Maternity leave or any other leave of absence often prevents a person from obtaining a mortgage,” said John Councilman, president of AMC Mortgage in Fallston, Md. “There are some who long for the days when such strict proof of income was not required.”

The lenders’ new attitude can be traced, in part, to new loan quality-control measures that went into effect earlier this year. Fannie Mae and Freddie Mac, the two quasi-governmental mortgage giants that buy the bulk of conventional loans from lenders, have not changed their rules for qualifying for a mortgage. But the system of checks and balances has been tightened, making lenders increasingly skittish.

Fannie, for instance, now requires lenders to recheck a borrower’s financial situation right before the loan closes. That includes calling an employer to verify employment. Before, lenders required only a statement in writing. Fannie’s new rules went into effect on June 1. Freddie’s similar rule took effect in January.

Both Fannie and Freddie have always required that borrowers have enough income to pay for the loan on closing day — and the lender must document that the income is likely to continue for at least three years.

But here is how some lenders are interpreting the guidelines for, say, a new mother receiving short-term disability insurance for a couple of months (new mothers may receive disability payments while on maternity leave, though the amount and length depend on state law and company policies).

Since the disability payments will not continue for three years, these lenders will not count it as qualifying income, brokers said, and will require the new mother to reapply for the mortgage once she returns to work. (The same logic may apply to an injured employee receiving worker’s compensation.)

That is what happened to Elizabeth Budde, a 33-year-old oncologist who lives in Kenmore, Wash. She nearly lost her mortgage after a loan officer learned she was home with her newborn.

With stellar credit and a solid job, Dr. Budde said she had been notified via e-mail that she was approved for a loan on June 15. But that note prompted an automatic, “out of the office” e-mail reply from Dr. Budde’s work account, which said she was out on maternity leave.

The next day, Dr. Budde received a second e-mail message from the lender, this time denying her loan approval. Since “maternity leave is classified as paid via short-term or temporary disability income,” the e-mail message said, it could not be used because it would not continue for three years.