BuckleySandler LLP: HUD Challenges Pregnancy Discrimination in Home Mortgage Lending

Excerpted from Infobytes, a weekly electronic newsletter on developments in financial services law from BuckleySandler LLP. For the full issue of Infobytes, click here: http://www.buckleysandler.com/infobytes/issues/infobytes_june_10_2011/

On June 1, 2011, HUD announced a settlement agreement with Cornerstone Mortgage Company (Cornerstone), which it had charged with discriminatory lending practices against expectant mothers in violation of the Fair Housing Act. Cornerstone (dba Cornerstone Home Lending) agreed to (i) provide  $15,000 compensation to Dr. Lihua Elizabeth Budde for claims that she was initially denied a mortgage loan even though she was on paid maternity leave and planned to return to work; (ii) create a $750,000 compensation fund for other Cornerstone borrowers who experienced similar pregnancy discrimination at the time they applied for loans; (iii) notify all borrowers who applied during a two-year time frame of their right to seek compensation if they experienced similar discriminatory treatment; and (iv) pay successful claimants $7,500 or a lesser pro rata share of the fund if there are more than 100 eligible recipients.  Cornerstone was also required to adopt new policies and deliver fair lending training to all employees with significant involvement in residential lending. HUD also charged Mortgage Guaranty Insurance Corporation (MGIC) and two MGIC employees with pregnancy discrimination by requiring complainant Carly Neals to return to work from maternity leave as a condition to approving a mortgage insurance application related to her loan.  

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