PNC settled a lawsuit this month over its refusal of a mortgage loan to a Connecticut couple because the wife was on maternity leave. As part of the settlement, the bank must review the last two years’ worth of mortgage applications in eight states.
The Department of Housing and Urban Development (HUD) alleged that the bank violated the Fair Housing Act by requiring the wife, a Navy veteran, to go back to work before it would approve her and her husband’s VA- guaranteed loan.
The woman was forced to choose between cutting her maternity leave short and providing a month’s worth of paystubs to PNC to get the mortgage, or closing on the house a month later. The couple chose the latter but then had to pay an extra $3,000 to the seller.
That violates the Fair Housing Act, which prohibits lenders from discriminating against homebuyers based on their sex or family status, according to HUD. Lenders can’t refuse to approve a mortgage loan or refinancing because a woman is pregnant or on maternity leave.
PNC did not admit fault in the settlement, claiming instead that it did not actually refuse the loan. Nevertheless, under the deal with HUD, the lender will pay the couple $15,000 and then review similar applications from the last two years in Connecticut, Maine, Massachusetts, New Hampshire, New York, Pennsylvania, Rhode Island, and Vermont. PNC will pay $7,500 to any identified loan-seekers whose applications were denied because they were pregnant or on maternity leave.
HUD Targets Maternity Discrimination
HUD began investigating this type of discrimination in lending three years ago, according to the agency. According to one industry watcher, the Connecticut case is the seventh settlement extracted by the agency.
“There was another similar settlement a couple years ago,” notes Eric Dinnocenzo, a real estate and insurance lawyer in Manhattan. “In that case, it makes the lender’s actions here only more egregious.”
HUD, known for its oversight of public housing, has stronger powers of investigation over the entire housing industry than one might think, and they may be getting stronger. “For too long, HUD has been viewed by both its employees and external partners as lacking in its ability to provide the support needed to fully deliver on its mission,” admits the department in its Fiscal Year 2010–2015 Strategic Plan.
“HUD is in the midst of a reinvention that is leveraging technology and a new way of doing business to respond to the need for increased transparency and improved service delivery,” says the plan.
Dinnocenzo says he has recently seen the department’s investigative powers at work regarding discrimination in housing. “A person just files a complaint with HUD and it can thereafter investigate. Sometimes HUD will also hand off the complaint to a state anti-discrimination agency,” he says.
Even a Neutral Policy Can Discriminate
“Typically, discrimination against pregnant women is . . . straight-forward in the context of housing,” Dinnocenzo observes. The discrimination can be overt, as when a landlord or lender clearly connects a rejected application to someone’s pregnancy.
But landlords sometimes make up reasons for denying an application, when really they don’t want to rent to families with children. “Whatever the case, there is no legitimate reason for the discriminatory action,” he adds.
In PNC’s case, even though it might have seemed that its policy of only lending to people who are currently working was fair, when it applied that policy to a woman who was on maternity leave, that violated the law.
“These are loans that the women would have been eligible for, but for their pregnancy,” Dinnocenzo says. “If they were not pregnant, there presumably would have been no problem with their applications and they would have been shepherded through the process.
“So the root reason they were rejected was because they were pregnant, and if the lender’s actions are not prohibited, then there would be no teeth to the pregnancy discrimination laws in this context.”