The Plot Thickens

Written By: Bonnie Wilt-Hild

I have decided that it just does not pay to be nosy. As you can imagine, by that statement alone, I do have a tendency to stick my nose in places it really doesn’t belong simply because it’s interesting and of course, because it doesn’t belong there (call it my rebellious streak).

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One of those places happens to be the Press Room on the U.S. Department of Housing and Urban Development website. This time as it turns out, instead of finding some juicy information about who was being prosecuted for what, I end up with a press release that goes just one step further to complicate the already grossly complicated world of mortgage credit underwriting.

As if we don’t already spend enough hours of the day navigating what could be termed as nothing more than a mine field subjective rhetoric which does nothing more than to confuse every concrete definition of sound underwriting practices by way of interpretation, we now have a new matter of contention which I will share with you while we all contemplate the meaning of the word clarification.

The press release I am referring to is HUD no. 11-108 which was issued for release on June 1, 2011 and summarizes HUD’s actions against pregnancy discrimination in home mortgages. Now I will agree that overall, the suit makes sense because discrimination in any form disgusts’ me. It’s the logistics of the suit and how it will affect documentation standards from a mortgage credit underwriting standpoint that concern me.

The press release discussed the settlement agreement with Cornerstone Mortgage Company of Houston Texas which was the result of HUD charges against the company for engaging in discriminatory lending practices against expectant mothers. Additionally, in a separate action, HUD has charged Mortgage Guaranty Insurance Corporation (MGIC) as well as others, with engaging in pregnancy discrimination in issuing mortgage insurance in violation of the Fair Housing Act.

The grounds for the claims of discrimination are based on claims of an individual who claimed that she was initially denied a mortgage loan even though she was on paid maternity leave and planned to return to work. HUD, after review of the case agreed this was indeed a violation of The Fair Housing Act under which lenders are prohibited from engaging in housing discrimination on the grounds of a person’s sex or familial status.

As a result HUD’s Assistant Secretary for Fair Housing and Equal Opportunity issued a statement indicating that pregnancy is not a basis to deny or delay a loan. He went further to state that mortgage professionals may verify income and other resources and have eligibility standards but they may not single out women on maternity leave to deny or delay loans that they are otherwise eligible for. As a mortgage professional I agree that in a perfect world this makes complete sense, however, in the world that I underwrite in, there is no way I would be able to justify closing this loan prior to the borrower returning to work.

First, we have the issue of determining continuance of income for at least three years for all types of income that is not earnings from employment or self employment. I cannot determine that short term disability will continue. Next, any AUS system that I use including Total Scorecard is going to request a paystub be obtained supporting the monthly earnings as indicated on the 1003. Again, as the borrower is on maternity leave, this is unobtainable documentation and will result in a material deficiency should I close the loan without such documentation.

Finally during the normal course of underwriting, FHA as well as FNMA & FHLMC requires that we review a borrower’s income to determine whether the borrower can reasonably be expected to continue paying their mortgage however we are unable to inquire about future maternity leave or other types of leave that would constitute a violation of the Fair Housing Act.

This is where my wish for clarification comes into play because from an underwriting standpoint, if I know a borrower will be taking leave from full time employment and earning only a portion of their normal income, due diligence dictates that I use the lower earnings, which by the way I cannot documentation continuance of, to qualify the borrower. Pretty easy to surmise this case will be a buy back.

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In closing I would like to say that I do hope clarification is forth coming because all practical underwriting principals scream that approving a loan on the “assumption” that a borrower will return to work is a bad idea although so is discriminatory lending practices. With any luck we will receive that clarification sooner than later. Have a nice week and happy underwriting.

About The Author

Bonnie Wilt-Hild - As an NAMP® staff writer, Bonnie currently serves as a senior instructor for FHA Online University ( as well maintains a full-time mortgage underwriting position as the Senior FHA DE Underwriter for a major lending institution. With over 25+ years of senior-level FHA/VA Government underwriting experience, Bonnie is considered the "Queen of FHA Loans". If you're interested in becoming a writer for NAMP®, please email us at:


Opinion-Editorial (Op-Ed) Disclaimer For NAMU® Library Articles: The views and opinions expressed in the NAMU® Library articles are those of the authors and do not necessarily reflect any official NAMU® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMU®. Nothing contained in this articles should be considered legal advice.