Mortgage Insurer Settles Suit over Maternity Leave Policy

Mortgage Guaranty Insurance Corporation (MGIC) has settled a suit with the Department of Justice arising out of a claim that it discriminated against women on maternity leave.  MGIC has agreed to compensate affected individuals and to pay civil penalties to the U.S. government.  This is the department's first settlement involving gender discrimination and mortgage insurance which is required by most lenders when a borrower can put less than 20 percent down on the purchase of a home.

At issue is MGIC's policy that required women on maternity leave to return to work before the company would insure their mortgages even when those women had a guaranteed right to return to work.  Maternity leave is generally for a period of six weeks to three months prior to and following the birth or adoption of a child; leave which is typically unpaid.  Only about 12 percent of employers provide paid maternity or paternity leave.

MGIC has agreed to pay a $38,750 civil penalty and to establish a $511,250 fund to compensate 70 individuals who were affected by the company's policies as identified by a review of the companies files.  The suit was originally referred to DOJ  by the Department of Housing and Urban Development (HUD) based on a complaint from a Wexford, Pennsylvania loan applicant who did return to work, forfeiting her leave in order to close her mortgage loan.      

The settlement also requires that MGIC follow a number of detailed nondiscriminatory provisions involving the treatment of women or men who are on or have returned from leave, paid or unpaid, related to the birth, adoption, or foster care placement of a child.  MGIC has also agreed to monitor its treatment of such loan applications, to provide appropriate training for its employees, and to provide nondiscrimination notices to mortgage applicants.

"Mortgage insurance is essential in order for many people to buy a home," said John Trasviña, HUD Assistant Secretary for Fair Housing and Equal Opportunity. "Borrowers should not be denied mortgage insurance for the very reason they often buy a home: to provide a decent home for an expanding family. HUD will continue to work with the Justice Department to take appropriate action against insurers and lenders who violate the Fair Housing Act."  

MGIC is the subject of a separate private class action lawsuit brought by the original HUD complainant and has entered into a preliminary settlement which remains subject to court approval and may result in additional damages being awarded to the plaintiffs.