Sex Discrimination Alive and Well in Mortgage Lending

There is little doubt that, most housing discrimination cases that arise under the Fair Housing Act involve racial and disability based discrimination. Other cases of discrimination such as those based on sex or gender are subtle and often rare. Yet the Department of Housing and Urban Development (HUD) says that a round of recent fair housing complaints and mortgage discrimination charges prove that sex discrimination is alive, well and on ascending.

As pointed out in this blog, the Fair Housing Act prohibits discrimination against a renter or a homeowner based on race, disability, color, religion, national origin, familial status and sex. Thus, gender-based discrimination in lending practices is illegal. This includes claims for imposition of different mortgage terms, and claims for refusal to extend a loan based on the gender of the applicant or buyer.

Despite these protections, investigations by HUD and the New York Times show that, accessing a mortgage is more difficult if you are a pregnant mother.  According to HUD, it receives regular complaints that banks and brokers deny women loans based on pregnancy or maternity leave.  Some lenders single pregnant women out for different treatment and offer them different, less desirable mortgage products (when they do not deny them outright.).

HUD has been investigating dozens of complaints against lenders who allegedly denied families mortgages because the wife was pregnant or on maternity leave. As John Trasvia, HUD’s assistant secretary for Fair Housing and Equal Opportunity noted, “Where lenders run up against the law is where they single out pregnant women for a difference in treatment based upon an assumption that either they’re not being paid on leave, they don’t have a job to go back to, or that they are unwilling to go back.” Under the law, lenders may not use parental leave as a basis for denial if the borrower demonstrates that she intends to return to work, and otherwise has enough income to qualify for the loan.

Since the government’s investigations began, several lenders, including Cornerstone Mortgage and Bank of America, have reached agreements to settle complaints of discrimination. Also, a settlement was recently reached involving a Navy veteran who said a PNC Mortgage representative in Trumbull, Connecticut, told her she had to be back at work from maternity leave to obtain a Veterans Affairs loan. According to the complaint, the woman and her husband negotiated an extended closing date for a house they were buying in Newington, so she wouldn’t have to cut her leave short. They said the seller charged them $3,000 more. Under the settlement, PNC will pay the couple $15,000. In addition, the company will review V.A., loan applications from the last two years in New York, Pennsylvania, Rhode Island, Connecticut, Vermont, New Hampshire and Maine to determine whether any denials were based on pregnancy or maternity leave.

However, it is important to note that in general, gender or sex discrimination in housing is not unique to women. Courts have recognized that the rules protect men, as well as women, in finding owners liable for denying housing to male applicants on the assumption that they were more likely to damage the property or host loud parties than female residents.

HUD is Mandating Westchester County to Meet the Settlement Requirements

In a rare move, HUD sent Westchester County notice that it has one month to come up with a plan to comply with three major requirements of the 2009 settlement. Failure to do so, Westchester will permanently lose millions in grants from HUD.  One of the requirements involves both a ban on discrimination based on income and ending segregation or exclusionary zoning. As a result, Westchester County stands to lose an estimated $7.4 million in federal HUD funding for failing to comply with the terms of the Fair and Affordable Housing Settlement.

In 2009, the county was facing crippling fines for having taken tens of millions of federal housing dollars while falsely claiming it had complied with fair-housing mandates. In settling the case, the county agreed to build hundreds of affordable units, analyze how exclusionary zoning and other obstacles blocked fair housing, and take steps to overcome them. The County was also supposed to promote a law to forbid landlords from discriminating against tenants who use government vouchers to pay rent.

However, in 2010, when legislators passed the bill protecting tenants, Astorino vetoed it, and then tried to argue that the county had met its obligation to promote the law. The courts have ruled otherwise. The 2nd U.S. Circuit Court of Appeals upheld a District Court decision that held that the county violated the settlement when Astorino vetoed a bill to prohibit landlords from discriminating against renters using government income such as Section 8 or Social Security to pay their rent, known as the source-of-income legislation.

Astorino vetoed the legislation in 2010, saying it was flawed and would saddle landlords with unnecessary regulation. The veto put the county in breach of the 2009 settlement, which calls for the development of 750 units of affordable housing in predominantly white communities. As the 2nd Circuit noted, you can’t veto a bill and “promote” it at the same time!

HUD’s stripping Westchester of federal funds will be an unprecedented move. HUD has been criticized for its failures to take actions to enforce the fair housing laws. Considering the fact that this issue has dragged on for more than three years, critics have argued that enforcement and compliance actions were long over due. HUD’s ultimatum seems to have paid off. Astorino agreed last Wednesday to sign the fair housing bill he vetoed in 2010 if the county Legislature passes it again.