July 29, 2013

HUD Helps Moms Facing Lending Discrimination

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Buying a home and starting (or growing) a family should be among the most joyful moments of our lives. We often describe these experiences as fundamental parts of the American Dream. However, especially in the wake of the 2008 mortgage meltdown, many families have faced illegal discrimination in the mortgage market after welcoming a new child. Starting in July 2010, and continuing through the present, the U.S. Department of Housing and Urban Development (HUD) has undertaken multiple investigations under the Fair Housing Act to ensure that families who qualify financially are able to get home loans free from discrimination.

In 2010, a New York Times article about Dr. Elizabeth Budde, a Seattle-area oncologist, caught the attention of officials at HUD’s Office of Fair Housing and Equal Opportunity (FHEO), the agency charged with enforcing the federal Fair Housing Act. Dr. Budde had been approved for a mortgage, but the lender reportedly revoked its loan approval after learning that she was on maternity leave. Even though Dr. Budde was receiving full pay and benefits while she cared for her baby, the lender said it could not consider her income because she wasn’t working.

HUD saw the case as a potential violation of the Fair Housing Act, which prohibits discrimination in lending based on gender and familial status, and launched an investigation. Dr. Budde eventually persuaded the lender to reinstate her mortgage, and HUD entered into a settlement agreement with the lender, who agreed to provide $15,000 in compensation to Dr. Budde and put another $750,000 into a fund to reimburse families who had faced similar discrimination.

Discrimination against women in housing because they are pregnant or caring for a child is against the law. While lenders have the right to verify income and determine creditworthiness, they may not single out women on maternity leave for special guarantees, ignore their resources, or assume they will not return to work. In 2012, more than 70 percent of mothers with children under the age of 18 were participants in the labor force—so when lenders make decisions assuming mothers won’t return to work, it is not only illegal, it is also unreasonable. Widespread refusal to approve home loans for women on maternity leave could result in excluding huge numbers of American families from the mortgage market.

Indeed, when HUD partnered with MomsRising to publicize the case, inform women of their rights, and ask mothers to share their stories of discrimination in the housing and lending markets, there was a huge response. HUD began aggressively investigating claims of maternity leave discrimination in lending, and since the settlement resolving Dr. Budde’s case in 2011, has entered into at least twelve more settlement agreements with lenders across the country, including five between February and June of 2013, with institutions like Bank of America and PNC Bank. HUD continues to investigate claims of discrimination against mothers and families in lending.

If you think you or someone you know has been discriminated against in housing or lending because of pregnancy, maternity leave, or familial status, you can contact HUD at (800) 669-9777 (voice), or 800-927-9275 (TTY), or file a complaint online.

Alexia Smokler is a Presidential Management Fellow in the Office of Fair Housing and Equal Opportunity.

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