by Bill Singer
Carly Neals applied in May 2010 with PNC Mortgage (“PNC”) to refinance the mortgage loan on the home she owns jointly with her husband in Wexford, PA. She is the mother of three children, the youngest was born on June 21, 2010. PNC determined, based on Fannie Mae’s underwriting guidelines, that Ms. Neals’ request to borrow 90% of the value of her home required private mortgage insurance. Mortgage lenders typically require applicants seeking to borrow more than 80 percent of their home’s value to obtain mortgage insurance.
Neals’s loan application documented her wage and bonus income from her full-time job for the previous two years. This documentation included pay stubs from April 29, 2010, and May 13, 2010, showing net pay of $2,148.98 in each two-week pay period. After giving birth to her youngest son on June 21, 2010, Neals began a period of fully paid maternity leave from her job.
Bill Singer
PNC decided in early July 2010 to approve Neals’s mortgage loan application conditioned on its approval by a private mortgage insurer. Mortgage Guaranty Insurance Corporation (“MGIC”), the nation’s largest mortgage insurance provider, received a request to insure Neals’s mortgage loan on July 12, 2010, which the company routed to its Newtown Square office, which handles loans secured by property in the Northeastern United States. As part of the insurance underwriting process, MGIC requested updated bank records for Neals, and because her employer’s method of depositing maternity leave income differed from its deposit method for regular wage income, those bank records disclosed the fact that Neals was on maternity leave.
Upon reviewing the bank records and maternity leave explanation on the morning of July 26, MGIC called the PNC underwriter assigned to Neals’s loan to explain that MGIC would not issue a mortgage insurance policy while she was on maternity leave.
And thus the basis for a lawsuit was begun.
HUD Complaint
Neals filed a complaint with the U.S. Department of Housing and Urban Development (“HUD”) alleging MGIC had discriminated against her when it preconditioned insuring her mortgage on the early termination of her maternity leave and subsequent return to work. After investigating the complaint, and concluding that the parties were unable to reach a settlement, HUD issued a charge of discrimination and referred the case to the Department of Justice (“DOJ”).
DOJ Complaint
On July 5, 2011, DOJ filed suit against MGIC in the U.S. District Court for the Western District of Pennsylvania, alleging that the company illegally 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 case was filed under the attorney general’s authority to seek redress for housing discrimination that raises an issue of general public importance.
Settlement
On April 30, 2012, DOJ announced that it settled its lawsuit against MGIC, which was the first such suit involving discrimination against women and familes in mortgage insurance. During its investigation of the matter, DOJ identified aggrieved individuals based on its extensive review of MGIC’s mortgage application records, and MGIC cooperated by turning over records during the course of settlement negotiations.
Overall, the settlement establishes a $511,250 fund to compensate 70 individuals aggrieved by the alleged discriminatory treatment between 2007 and 2010. MGIC will pay a $38,750 civil penalty. Neals will receive $42,500 from the settlement fund, 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 will be required to follow a number of detailed nondiscriminatory provisions in its future review of mortgage insurance applications involving women or men who are on, or have returned from, paid or unpaid leave related to the birth, adoption or foster care placement of a child. Further, MGIC will monitor its treatment of applicants on leave to care for a new child, to train its employees on the requirements of the fair housing laws, and to provide nondiscrimination notices to mortgage applicants.
Individuals compensated as part of the DOJ settlement remain eligible to receive compensation from the separate private class action lawsuit brought by the HUD complainant. MGIC has entered into a preliminary settlement of the class action lawsuit, which remains subject to court approval, allowing victims of MGIC’s alleged maternity leave discrimination to submit claims for extraordinary damages above the amount covered by the compensation provided through MGIC’s settlement with the United States.