Last spring, technology executive Shayna Coche was pregnant with her first child when she and her husband, Cedric Coche, decided to refinance the mortgage on their Southern California home. This was in the early days of the COVID-19 pandemic, when mortgage interest rates had just begun to descend. A refinance would shave hundreds of dollars a month off of their housing payment—a welcome saving for the expectant parents.

The Coches applied for a loan from United Wholesale Mortgage, one of the nation’s largest mortgage lenders. The couple had timed their application so that the loan would close just as Shayna gave birth, so they wouldn’t have to deal with the paperwork during her five months of paid maternity leave.

However, after the paperwork was finished and notarized—just days before the loan was expected to be finalized in mid-April—United Wholesale Mortgage declined to go through with the refinance. The lender had called to verify the couple’s employment just before the loan closed, a standard procedure. During that call, the loan officer learned Shayna had just gone out on maternity leave. Shortly after, the couple received an email from their mortgage broker informing them that their loan had been denied.

The stated reason was simple: Shayna was on maternity leave.

Denying a mortgage to a woman because she is on or plans to go out on maternity leave is illegal—a violation of equal credit and fair housing laws enacted in the mid-1970s and late 1980s. Yet it’s still happening today due to a lack of federal guidance and education for employees on the issue, little consistent regulatory oversight, and few consequences unless victims complain or sue.

While it’s impossible to tell just how pervasive the problem is, fair housing advocates and attorneys say it is more common than most realize. In the past decade, scores of victims of maternity-leave discrimination have filed federal complaints and lawsuits against lenders, including some of the nation’s largest financial institutions.

Such discriminatory practices seem to be a vestige of outdated stereotypes about women and concerns that mothers may not return to their jobs after having children and therefore might be unable to repay their loans.

“It definitely still is happening today,” says Morgan Williams, general counsel of the National Fair Housing Alliance. The civil rights organization and the local fair housing centers it works with are continually fielding and investigating these types of complaints. “It comes up regularly.”

In the Coches’ case, their loan denial was the direct result of an April 2020 policy change enacted by their lender as the pandemic was wreaking havoc on the economy. Their mortgage broker emailed them a copy of the internal policy.

“If a borrower is on leave, they MUST return to work before we can close,” stated the policy. Their broker emailed them an excerpt from the policy, which was shared with Realtor.com®. “This will include traditional leaves (like medical or maternity) as well as for people ‘on leave’ as an effect of COVID-19.”

A United Wholesale Mortgage spokeswoman said the lender is “not able to comment on ongoing legal matters.”

“I was shocked and outraged,” says Shayna, 39. She lives with her husband, who also works in the tech sector, and his two teenagers from a prior relationship in their four-bedroom, two-bathroom home, which Cedric had purchased in 2004 and previously refinanced. “This can’t be happening—and yet this very much is happening.”

More than 150 maternity-leave discrimination complaints were filed from 2010 to 2017 with the U.S. Department of Housing and Urban Development, according to the agency. The agency cracked down hard in some highly publicized cases against some of the nation’s largest banks in the early 2010s. That may explain why just nine maternity-leave cases involving lending were filed from 2018 through early May of this year.

The actual number of women who have experienced this kind of discrimination is likely much higher. Many women aren’t aware it is illegal, so they don’t file complaints. Even those who do may not know where or how to complain, or may be unwilling to go through the complex process. Some also choose to pursue private lawsuits instead of going through HUD.

“It emerged as a significant problem across the lending industry starting in 2010,” says civil rights attorney Sara Pratt, of Relman Colfax, a Washington, DC–based firm that specializes in fair housing and fair lending suits. Pratt previously worked at HUD, where she was involved in fair housing enforcement.

“Although some of the largest lenders in the country have become aware of this through complaints and have changed their policies, there are still many lenders who are following outdated and discriminatory rules,” says Pratt.

After Shayna’s maternity leave ended and she returned to work, the Coches found a new lender and refinanced their mortgage last fall. Then they sued United Wholesale Mortgage and its parent company, United Shore Financial Services. Their lawsuit alleges the lender discriminated against them based on sex and familial status in violation of the Fair Housing Act and seeks damages. The suit was filed on Feb. 26 of this year and is still in its early stages.

“This whole situation is much bigger than us,” says Shayna. “It’s important to me to set the example of an individual can take action, can make a point, can bring on the sting that’s needed. … They’ll think twice before they put someone else in this situation.”

The long history of discrimination in lending

Discrimination against women in lending has a long history of precedents.

Since women began entering the workforce, lenders have viewed them as riskier borrowers than men, because of an assumption that women would quit their jobs once they had children. That was the reason that many loan officers would discount a portion, if not all, of a young female applicant’s income when granting a mortgage, until the practice was outlawed in 1974.

Some loan officers in the early 1970s asked for letters from these women stating they would return to work if they had children or requested their doctors confirm they were on birth control. One lender from this period was accused of asking a young wife to promise to get an abortion if she became pregnant, while another reportedly refused to grant a mortgage unless the female applicant was sterilized.

Discrimination against women in lending was outlawed in 1974 through the Equal Credit Opportunity Act. That same year, “sex” was added as a protected class to Fair Housing laws, making it illegal to discriminate against women in housing. In 1988, “familial status” was added as a protected class under the Fair Housing Act. This made it illegal to discriminate against pregnant women, those in the process of fostering or adopting children, and those with children under the age of 18.

“The lenders have not changed with the times,” says attorney Pratt. She has worked on about five cases in as many years of lenders refusing to originate mortgages, refinance an existing mortgage, or make a home equity loan to a women on maternity leave, and is about to file a new case.

In 2012, Bank of America agreed to pay more than $160,000 after women on maternity leave claimed the bank wouldn’t refinance their mortgages. The payment was part of a conciliation agreement with HUD. Two years later, HUD reached a $5 million settlement with Wells Fargo Home Mortgage for discriminating against pregnant women and women on maternity leave who had just given birth.

Fair housing advocates would like to see a more organized and consistent effort from the federal government to educate lenders and their regulators on how maternity leave discrimination occurs and reminding them it’s illegal. They also believe further oversight and enforcement would help to combat the problem.

“Right now what is happening is cases against individual lenders,” says Pratt. She would prefer to see “federal regulators consistently come out with instructions to lenders about nondiscrimination against families where a woman or a man is on a leave related to pregnancy or childbirth.”

One woman took her case to court and won—yet still paid the price

Carly Fagan Barton was another victim of maternity-leave discrimination. In 2010, Barton, whose last name was then Neals, attempted to refinance the mortgage on the Pittsburgh-area house in the suburbs she shared with her husband and children. Cutting a few thousand dollars a year off of her mortgage payments was a savings that the attorney and wealth adviser knew would be “imprudent” to ignore.

Like the Coches, Barton had hoped to have the process completed before she went out on a 12-week maternity leave with her third child.

However, she was attempting to refinance in 2010, near the nadir of the financial crisis precipitated by the housing crash. Lenders were terrified as bad mortgages went bust. Laws had been enacted to shore up the industry, and mortgage lenders had significantly tightened their standards.

It was also around this time that more employers began offering paid maternity and paternity leave or provided some sort of paid, short-term disability leave for new mothers. Many lenders seemed unaware of how to treat these leaves.

Barton found herself caught between these two developments. Her mortgage insurance company, Mortgage Guaranty Insurance Corp., refused to sign off on the loan until she physically returned to work and could produce two consecutive pay stubs. That was despite the fact that she was earning the same amount of money while on leave as she would have in the office.

“Do you mean to tell me if I had surgery and was on short-term disability, you still wouldn’t grant this loan?” says Barton, now 43. “If a guy has knee replacement surgery, you don’t question whether he’s coming back to work.”

Barton returned to work a few weeks early in order for the loan to close. However, it continued to stall. So she took out a home equity loan to pay off her mortgage instead of refinancing. While the new loan had a lower interest rate than her original mortgage, it was still higher than the interest rate tied to a refinance.

She filed a maternity-leave discrimination complaint with HUD. Eventually, that turned into a class-action lawsuit. She settled with the mortgage company, which she declined to name. But the lawsuit with the mortgage insurance company dragged on until 2012. Mortgage Guarantee Insurance Corp. was required to pay a $38,750 penalty and establish a $511,250 fund to compensate victims.

“It took years to settle, and it took a lot of my time and energy,” says Barton. “It was incredibly stressful.”

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