The Washington Post recently reported that a Philadelphia woman and her husband had their mortgage application denied. The lender said that this was because the woman was not currently working. She was on paid maternity leave at the time. This is not the first case of a mortgage being denied due to maternity leave. The Department of Housing and Urban Development has received over 200 reports of discrimination against women applying for mortgages while on maternity leave, since 2010.
According to the 1968 Fair Housing Act, mortgage lenders may not discriminate on familial status. This means that it is illegal to deny anyone who qualifies for a mortgage but who is on maternity leave. Major lenders such as the Bank of America and Wells Fargo have done exactly that, though most have had to reach settlements when challenged in court.
There are many issues that can lead to a new mother or new parents being denied a mortgage. It is not always a conscious or punitive decision by the lender. In some cases, maternity leave falls under the category of short-term disability and is reported as such. This makes lenders nervous because some short-term disability becomes long-term, and the applicant never returns to work.
Experts have noted that men on paternity leave are rarely challenged in this way.