MReport January 2018

TheMReport — News and strategies for the evolving mortgage marketplace.

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20 | TH E M R EP O RT FEATURE T wo people with the same application are sitting in front of a mortgage lender. The potential borrowers have identical scores, backgrounds, and histories except that one individual has a box checked "Female" and the other has checked the box titled "Male." What happens? Historical- ly, mortgage lenders have unfairly and inaccurately treated female borrowers—especially single women, pregnant women, and minority women—as risky bor- rowers. The result is that women have faced serious discrimination by mortgage lenders. The 1988 Fair Housing Amendments Act is aimed at pre- venting discriminatory mortgage lending practices by making it un- lawful for lenders to discriminate against borrowers on the basis of sex, pregnancy, or familial status. This legislation also made inten- tional discrimination against preg- nant women who are potential homebuyers and borrowers illegal by providing that mortgage lend- ers cannot automatically assume that pregnant mortgage borrowers pose a greater risk of default to lenders. In this act, HUD stated that when underwriting a preg- nant woman, borrower lenders cannot: assume that she will not return to work for any specified postnatal period or anticipate that her income will be significantly reduced or halted altogether in the foreseeable future. Notwithstanding regulations, continuation of tight underwriting in recent years has not helped sin - gle, pregnant, or minority women obtain more favorable mortgages. Beginning with the fallout of the mortgage crisis in 2008, lenders have been much more hesitant to provide favorable loans to women due to their general lower income and relative career instability, including leaving the workforce temporarily for maternity leave or a more long-term absence for motherhood or taking care of the family. Doing it By Themselves: Single, Pregnant, and Minority Women A 2016 Urban Institute research report titled "Women Are Better Than Men At Paying Their Mortgages" found that despite the fact that single women are more reliable in repaying their mortgages than their male counterparts, they confronted several difficulties in securing mortgage loans. These women, as compared to single men and married women, were provided less favorable loan terms, including higher inter - est rates, and were more often asked to provide co-signers for all loans, including ones for very small amounts. It becomes a vi - cious circle because when single women default on loans, it is often a result of their difficult and unfair terms. Given the bar - riers they face in securing loans with favorable terms, some women simply have no choice but to rent instead of purchas - ing a home. Being on pregnancy, maternity, or paternity leave at the time of credit evaluation can negatively affect many mortgage terms and it is not uncommon for lenders to grant less-favorable terms to bor - rowers in these categories. While lenders have the right to deter- mine the incomes of families, they cannot single out and discriminate against pregnant women and women on maternity leave and the assumption that these women will not return to work must not be a factor in the lender's mortgage terms. These circum - stances may not be considered in determining the woman's debt-to- income ratio, the future or past history of employment compensa- tion, or the potential borrower's ability to repay the terms and conditions of a loan. Women who are racial minori - ties may be the most disadvan- taged by the mortgage industry's discriminatory lending practices. Since a larger number of African- American, Hispanic, and Latino women are separated, divorced, or widowed than white women, they must rely heavily, if not solely, on their own earnings when provid - ing financial information needed to secure loans or mortgages. Like single women in general, these women are only reporting one income, making it more difficult for them to secure loans. Additional factors that influence the ability of women to secure favorable loans with reasonable terms and interest rates include pay inequality, the rent v. own dichotomy, and general under - writing practices. On average, for every one dollar that a man earns, a white woman earns seventy- seven cents, an African-American woman earns sixty-four cents, and a Hispanic woman earns only fifty-six cents. Such a gender gap in salary results in a lower income for women, with more challenges in applying for loans. Income inequality not only affects single Checks and Balances: Ensuring Gender Equality in Lending Women borrowers still face unique challenges when taking a loan. Learn how lenders can combat unintentional discrimination. By Debbie Hoffman

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