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Need a Mortgage? Don't Be Pregnant

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Here's an unintended consequence of the post-crash emphasis on quality control in the mortgage business: New parents are being rejected because of the cost of taking maternity leave. The New York Times reports:

Even if a parent plans on returning to work within weeks, some lenders are balking at approving the loans.

“If you are not back at work, it’s a huge problem,” said Rick Cason, owner of Integrity Mortgage, a mortgage firm in Orlando, Fla. “Banks only deal in guaranteed income these days. It makes sense, but the guidelines are sometimes actually harsher than they need to be.”

It feels like only yesterday that a couple of employed people could sign a mortgage loan with a wink and a nod. Now, as the Times documents, parents are being denied loans, or asked to jump through hoops to gain approval, because the short-term "disability pay" that comes with maternity leave does not last long enough to be considered qualifying income.

One woman in the story saw her loan disapproved the day after she received an email saying that her application had been given the green light. What happened? She was ratted out by her own auto-reply message, which told all senders, including her broker, that she was on maternity leave.

Even after the recession caused a drop in the U.S. birthrate, it seems that some institutions are doing everything possible to send would-be mothers to other developed nations, where having a baby does not render a mother "disabled",  government-backed maternity or paternity leave checks continue for many weeks past birth, and one can still receive a mortgage for a home large enough to accommodate a growing family.

In the meantime, if you happen to be pregnant and want to pull one over on a broker, check out these ehow tips on dressing to camouflage the bump.
POSITION:  No positions in stocks mentioned.