Borrowing while pregnant?
A New York Times story about lenders leery of extending mortgages to couples expecting a baby has created such a furor, the U.S. Department of Housing and Urban Development weighed in last night to declare that it's launching "multiple investigations."
Turning a prospective borrower down for a loan based on the current usage status of her womb is illegal, HUD says.
"Lenders have every right to ascertain the incomes of families to determine whether they are eligible for a mortgage loan but they have no right to use a pregnancy or a short-term disability as a cause to deny that family a mortgage they would otherwise qualify for," HUD Secretary Shaun Donovan said in a statement. "Having a child should be a time for a family to celebrate and must not be a cause for unfair lending practices."
Lenders offering mortgages insured by FHA, the Federal Housing Administration, can't ask 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 says.
Some dissenting voices are saying pregnancy ought to be part of the equation.
People became so used to banks providing a mortgage to anyone with pulse during the housing boom that, suddenly, prudent underwriting shocks and amazes. "You mean the bank wouldn't give a couple a mortgage because it's worried about significant factors that could affect their ability to pay? The horror!" In fact, this is a great sign. It means that banks and mortgage companies have learned something from their errors during the housing bubble. Sensible underwriting is making a comeback, and that's ultimately good for the U.S. economy.
Some readers commenting on that piece agreed; some didn't. One, for instance, retorted: "Based on the argument that bad things can happen or that people can change their minds, then no one should get a mortgage, ever."
What strikes you as factors that lenders (and borrowers, for that matter) ought to take into account?