Hello All:
There has been a lot of talk about banks and mortgage companies denying loans to women who are pregnant or have just delivered- is this true? Face value it might look that way, but it just isn't so - let me explain.
First off this has nothing to do with pregnancy. There is nothing new here at all. We are talking about mortgage guidelines! We are in a Full Documentation World now and they, the banks and mortgage companies need to document income and employment.
Here is how Employment and Income is verified by the powers that be:
• Review pay stubs, W2's etc... If the stubs mention disability or maternity leave it is a red flag
• Call the employer: "Does Jane Doe work there?" This call is often made just before closing since guidelines require a "fresh" verification. If the borrower is on a temporary leave it WILL cause a problem.
Why? It is pretty simple, mortgage guidelines require income streams to last at least 3 years to be considered for qualifications. Maternity leaves are not permanent income, they are often only for a few months and may only be a form of short term disability.
Will a loan be denied if some one is on maternity leave? No, But the closing may be postponed until the borrower returns to work. The guideline has always required a pay stub to prove the borrower has returned to work. This is not just for Maternity leave, it could be for any form of temporary disability.
This is not a discrimination item; it is purely an income issue. It is also Mortgage Banking 101... The basics that have been in the underwriting guidelines for decades. So be careful of what you read, and the source is important as well. A lot of the uproar was from an article floating out in the media that sensationalized guidelines as if they were some new 2 headed beast, The media often takes the side of an issue that will sell things rather than inform accurately.
Now that we have that straight happy investing.
To your success,
James Gage
