The Department of Housing and Urban Development is charging Mortgage Guaranty Insurance Corp. with violating the Fair Housing Act because its underwriter required a woman return to her job from maternity leave as a condition for approving the application for mortgage insurance.
HUD made the announcement at the same time it revealed it settled a case with Cornerstone Mortgage Co., Houston, which had denied a loan to a pregnant woman on maternity leave.
An MGIC spokeswoman said the company does not comment on pending litigation. A request for comment from Cornerstone has not been returned.
However, in the settlement agreement, the company maintains that its actions were "legally and prudently sound."
The settlement requires Cornerstone to pay Dr. Elizabeth Budde, an oncologist, $15,000, plus set up a $750,000 victims' fund to compensate other borrowers from the company who might have been discriminated against because they were pregnant or on maternity leave at the time they applied for a loan.
HUD assistant secretary John Trasvina at a press conference in New York said there are less than one dozen pending cases involving similar charges, but none involve any other mortgage insurers right now.
The agency is hoping to get more women to come forward as a result of the publicity coming from these two cases. "We expect to have more open matters as we proceed forward," he said.
"We don't believe that the company that has come forward to settle is much different from other companies around the country. We do believe it is a nationwide matter, so we expect more people to come forward."
The MGIC case involves a Pennsylvania woman, Carly Neals, who filed an application for refinancing with PNC Mortgage, but because the loan had a 90% loan-to-value ratio, needed mortgage insurance.
After applying for the loan, Neals went on maternity leave from her job. The MGIC underwriter is alleged to have told the PNC underwriter that MGIC could not proceed until Neals was back at work full time.
After back and forth between the parties, MGIC did eventually approve the loan and a closing was scheduled, but the HUD documents said Neals declined to close the loan with PNC "because of her concerns about the discriminatory conditions required for approval."
Among the damages HUD is seeking are civil penalties of $16,000 each against MGIC and its underwriter Kelly Kane and underwriter production manager Elgina Cunningham.
