What Does Birth Control Have to do With Your Mortgage?

By Galen Sherwin, Staff Attorney, ACLU Women’s Rights Project & Vania Leveille, Legislative Counsel, ACLU Washington Legislative Office

Imagine if you were applying for a loan and were asked to write a letter to the bank discussing your "family planning." Believe it or not, that is what happened to one woman in Pennsylvania who was applying along with her husband for a home mortgage.

Indeed, as the New York Times first reported, some lenders are applying newly tightened restrictions on home loan credit in the wake of the foreclosure crisis in a way that has resulted in pregnant women, women on parental leave, couples, and families with children being inappropriately questioned about irrelevant aspects of their private lives and subjected to pregnancy discrimination and sex stereotypes.

News reports suggest that lenders’ behavior is based on a misinterpretation of guidelines put out by the federal mortgage giants Fannie Mae and Freddie Mac, which now require lenders to obtain verbal verification of employment 10 days prior to closing, to verify two years of employment history, and to document three years of projected income.

But some lenders have told moms-to-be and new mothers flat-out not to bother applying for loans, or have denied their applications without even verifying their income once they discovered the women were pregnant or on maternity leave. In other cases, lenders have used the temporarily lower income that women would receive during their leave, rather than their regular salary, as a basis for determining their ability to pay over a three-year period. Because women are more likely than men to take short-term unpaid or reduced-pay leave, such practices have a disproportionate effect on women.

If you’re thinking "this can’t be legal," you’re right. Federal law prohibits discrimination in housing and credit based on gender, family status (including pregnancy) or marital status. What’s more, these practices are based on impermissible stereotypes about women’s commitment to returning to the paid workforce after having babies.

These assumptions are out of touch, to put it mildly: The reality is that the vast majority of women do return to paid work once they have children. Many families are headed by single women who do not have an option not to return to work, and most two-parent families cannot afford to give up a dual income.

The federal Department of Housing and Urban Development (HUD) has launched an investigation into these illegal practices, and Fannie and Freddie have announced their intention to clarify their guidelines making clear that such behavior is impermissible. The ACLU has joined with a group of advocates, including MomsRising, the National Partnership for Women and Families and the National Women’s Law Center, that has met with HUD and Fannie and Freddie to ask that we be included in the process of formulating this clarification.

Women — and particularly low-income and minority women — have been disproportionately affected by predatory lending. The foreclosure crisis was partly a result of those practices. Discrimination in access to legitimate credit, such as prime mortgages, is the flip-side of those predatory practices.

Hopefully, with HUD’s prompting, lenders will start to take a hard look at their operations — and at the new guidelines that we expect will be issued soon. Instead of focusing on our potential progeny, they should be making sure that all creditworthy consumers, regardless of sex or familial status, can get loans to help move the housing market toward recovery.

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