VA Loans and Fair Housing Laws
Every so often, the Department of Veterans Affairs issues sanctions against a lender or group of lenders for violating VA regulations. One set of regulations lenders are required to follow in order to be qualified to issue VA home loans? Fair Housing laws. These were passed as part of the Civil Rights Act of 1968 and anyone applying for a VA mortgage is protected from discrimination under Fair Housing rules.
According to the VA, lenders are prohibited from refusing to deal, falsely stating that a property is not available for sale, discriminating when it comes time to finance a VA home loan (or any other type of federally assisted housing loan including FHA loans) and advertising that discriminates.
But what constitutes discrimination? The most obvious infractions are based on race, handicap, religion and sex. But did you know a lender cannot deny financing to a qualified applicant or refuse to deal based on what the VA calls “familial status”? In short, a VA loan may not be refused or delayed based on the pregnancy status of a couple or individual.
Why would a loan officer be tempted to discriminate based on a pregnancy, planned or current? The good ones don’t, obviously. But in cases where discrimination against a borrower happens on the basis of pregnancy, it’s often because the lender questions the borrower’s ability to pay based on family leave that could be taken once a child is born. Will the mother earn or be able to return to work?
The Department of Housing and Urban Development issued a statement in the summer of 2010 addressing this issue specifically. HUD secretary Shaun Donovan said, “”Lenders have every right to ascertain the incomes of families to determine whether they are eligible for a mortgage loan but they have no right to use a pregnancy or a short-term disability as a cause to deny that family a mortgage they would otherwise qualify for.”
A HUD press release stated, “The Fair Housing Act prohibits discrimination against a borrower on maternity leave if she can demonstrate that she intends to return to work and can meet the income requirements of a loan while on leave. ”
It’s that simple. VA loans and other federally assisted home loan programs do not allow discrimination in any form as defined by the Fair Housing Act. Those who feel they may have a case against a lender should contact the Department of Veterans Affairs immediately to get guidance and help.