During the past year, charges of lending discrimination involving people on maternity leave have led to settlements with at least four companies. The latest to reach an agreement is a mortgage insurance company.
The Department of Housing and Urban Development announced in June 2011 that a lawsuit was being filed against MGIC Investment Corp. as a result of denying coverage to Carly F. Neals because she was on maternity leave. HUD charged the mortgage insurer with violating the Fair Housing Act.
The act prohibits mortgage discrimination based on familial status as well as race, color, religion, national origin, sex and disability.
“If a borrower is on maternity or short-term disability leave at the time of closing, lenders must document the borrower’s intent to return to work, that the borrower has the right to return to work, and that the borrower qualifies for the loan taking into account any reduction of income due to their leave,” HUD said at the time.
HUD referred the case to the Department of Justice, which filed a federal lawsuit in July 2011.
“MGIC required women on maternity leave to return to work before the company would insure their mortgages even for women who had a guaranteed right to return to work after the leave,” the lawsuit alleged.
The Justice Department announced that a $540,000 settlement has been reached with Mortgage Guaranty Insurance Corp. The settlement was approved Monday by the U.S. District Court for the Western District of Pennsylvania.
The agreement calls for a $38,750 civil penalty and a $511,250 compensation fund for 70 individuals who were impacted by the discriminatory policy between 2007 and 2010.
A number of detailed, non-discriminatory provisions in MGIC’s future review of M.I. applications involving women or men on, or returning from, paid or unpaid leave related to the birth, adoption or foster care must be followed by the mortgage insurance company. Employees need to be trained about related rules and laws.
Neals, the Wexford, Pa., loan applicant who filed a complaint with HUD, will receive $42,500 from the settlement “to address her specific pain and suffering and compensate her for leave that she forfeited in response to MGIC’s requirement that she return to work.”
MGIC has also preliminarily settled a private class action filed by Neals. That action, which is subject to court approval, would enable victims to submit claims for “extraordinary damages” that exceed the amount covered in the settlement with the Justice Department.
The Justice Department noted that the Milwaukee-based mortgage insurance company cooperated during the course of settlement negotiations by turning over records.
HUD Assistant Secretary for Fair Housing and Equal Opportunity John Trasviña explained that mortgage insurance is “essential” for many borrowers, and expanding a family should not be hindered by denied policies.
HUD operates the Federal Housing Administration, which competes with private mortgage insurers like MGIC.
The settlement was preceded by settlements with Magna Bank and Home Loan Center Inc. announced last month by HUD as a result of alleged discrimination involving women on maternity leave. Magna Bank’s settlement was $14,085, while Home Loan Center’s is $15,000.
HUD reached a settlement with Cornerstone Mortgage Co. in June 2011 over charges of discrimination in the case of a pregnant loan applicant.
UNITED STATES OF AMERICA v. MORTGAGE GUARANTY INSURANCE CORP. et al.
Case No. 2:11-cv-00882-RCM, July 5, 2011 (U.S. District Court for the Western District of Pennsylvania).
NEALS v. MORTGAGE GUARANTEE INSURANCE CORPORATION.
Case No. 2:10-cv-01291-DSC-RCM, Oct. 1, 2010 (U.S. District Court for the Western District of Pennsylvania).
Related:
Discrimination Litigation Gets Costly
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