Lender denies client because of pregnancy: Broker

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One broker’s application was denied by the lender after he voluntarily disclosed his client's pregnancy.

“There is a Canadian citizen that applied for a mortgage and a person who applied to be a Canadian citizen – they’re a couple – and I disclosed to the lender that she is pregnant and that she has applied for permanent residency,” Stephane Prevost, principal broker at Opulent Mortgages told MortgageBrokerNews.ca. “The lender declined the file because we were using the combination of both incomes; she’s on a work visa and she has been here for four years.”

Prevost told the lender about the pregnancy because he believed it would escalate her application for permanent residency and demonstrate her commitment to staying in Canada. However, the lender – whose name Prevost refused to disclose – believed the pregnancy could potentially change the client’s income level.

“The lender declined the file because, as they said, she is pregnant they can only use 60 per cent of the income,” Prevost said. “I (voluntarily) disclosed to the lender she was pregnant to solidify the fact that she is on a work visa, that she had applied for permanent residency, and it would escalated the process for her to become a permanent resident.

“But we don’t know what the outcome of the pregnancy will be and as far as I’m concerned it’s discrimination.”

According to Prevost, the clients are “extremely qualified,” have high credit, a “very reasonable income,” and low debt to income ratios.

However, this particular file may eventually get approved.

“(They refused) until five minutes ago when they found out I was going to make a complaint and it got escalated and (now) I’ve got a verbal approval,” Prevost said. “This issue is resolved but I’ve never once seen a lender use that as an excuse to get out of the deal.”
  • Marcy Berg on 2014-04-08 11:10:34 AM

    This is news? It happens all the time. It's positively draconian some of the methods lenders use to determine income for pregnant women. It's also worth noting how women in middle of separation and divorce are treated when trying to buy out a spouse. Sadly, its part of my daily practice. I applaud this broker for going public with the experience.

  • Anthony C. on 2014-04-08 11:34:06 AM

    To Stephane Prevost:

    In the chance you read this message and provided that you still have retention of the client and the deal is still live, my suggestion would be to send the file to Merix Financial as they will use 100% of the reported income, prior to the commencement of the mat leave...

    A job letter is usually all that it takes, but in this case, you may want to cover your bases and also consider getting CRA confirmation of income to support previous year(s) earnings.

    Good luck with this one...

  • LanceH on 2014-04-08 11:35:42 AM

    Divorcing women are treated differently? I've done a couple of divorce mortgages, have one on my plate now and have seen no difference in treatment. Examples?

    Discriminating based on income or 'cause she's a pregnant female not yet a citizen? Banks discriminate based on income stability all the time. They do so with born n raised Cdns, including men, why would they not do so here? There's a couple lenders that will go up to 1yr of pregnancy leave using full income, so long as they have a job letter stating the position is being held. I'd Use one of those.

  • Deepak Bansal, AMP on 2014-04-08 11:37:42 AM

    Stephane, great job in standing up for your client and going public with this!

  • Brian on 2014-04-08 11:52:26 AM

    Isn't this due diligence by the lender? If she is pregnant chances are she'll be going on mat leave for a year. So 60% income is about right. If she can't afford to make the payments during this time isn't it prudent to not take on a mortage as they could be putting themselve under undue hardship?

    If they are so well qualified then qualifying at 60% income should be no probelm.

  • Kent Farnsworth on 2014-04-08 12:11:30 PM

    If I'm an underwriter I would probably ask for verification that the person is working full time and will have their job to go back to after maternity leave... Not sure the legal ramifications of cancelling a loan due to pregnancy, but an underwriter does need to make sure that their bases are all covered.

  • Broker in Training on 2014-04-08 12:23:18 PM

    When granting credit, there are 5 C's of credit that are reviewed . One on the main C's is Capacity. The ability to pay back the loan. Since this C was going to be reduced, it would increase the chance of default. I agree with the lender, they need to protect their bottom line. Not sure I truly understand the issue. The granting of credit is not a charity.

  • Jon on 2014-04-08 12:43:35 PM

    call it what you what you want but this couples income will drop while she is on Mat leave. For most people, the basic rate for calculating EI benefits is 55% of your average insurable weekly earnings, up to a maximum amount. As of January 1, 2014, the maximum yearly insurable earnings amount is $48,600. This means that you can receive a maximum amount of $514 per week. So if your client was making substantially more before matenity leave it is prudent to not qualify them on income that they no longer have. I've 3 kids and know 1st hand the challenges that arise come from a drop in income with maternity pay

  • Jon on 2014-04-08 12:43:40 PM

    call it what you what you want but this couples income will drop while she is on Mat leave. For most people, the basic rate for calculating EI benefits is 55% of your average insurable weekly earnings, up to a maximum amount. As of January 1, 2014, the maximum yearly insurable earnings amount is $48,600. This means that you can receive a maximum amount of $514 per week. So if your client was making substantially more before matenity leave it is prudent to not qualify them on income that they no longer have. I've 3 kids and know 1st hand the challenges that arise come from a drop in income with maternity pay

  • Ron Butler on 2014-04-08 1:04:07 PM

    Lenders have a right to their policies, it's their money. That being said there is huge reputational risk associated with discriminating against people engaged in the reproduction of our species. Governments don't like it and the public hates it, so it is bad corporate policy.

  • Val on 2014-04-08 1:45:54 PM

    I've been in the industry for over 15 yrs. This broker should not have EVER got an approval, count your blessings the lender came thru and yet you still broadcasted the scenario, interesting. The lender/underwriter's only error was verbiage on the decline. She is not a Cdn Citizen, her income is NOT guaranteed. I'm more disappointed in the broker.

  • Anthony C. on 2014-04-08 2:15:56 PM

    @ Val

    Why should the broker "not have EVER got an approval".

    Just curious to know why...?

  • Pamela Wyant on 2014-04-08 2:38:39 PM

    I can understand a lender questioning the continuance of income which is based on a Work Visa only...how will Mat Leave affect the Visa status if she is not able to work? I think at the very least I would need to see something from the employer confirming that she does have work to return to and then something also from the government that confirms the Visa would not be jeopardized. Is she even eligible for EI under the circumstances & is 60% of income during leave even possible for her? Also, while lenders have definitely tightened their policies, we have to remind ourselves that approvals are based on lender & insurer policy...not what we as brokers think is common sense. Our natural instinct is to get ALL the deals approved, isn't it? Someone has to draw a line somewhere...

  • Kent Farnsworth on 2014-04-08 3:04:53 PM

    Think like an underwriter, not like a mortgage broker. That way it's much easier to prepare ahead of time for what you should already know will be a stumbling block.

  • Ed on 2014-04-08 3:06:36 PM

    I salute this broker... Lender must understand that being pregnant doesn't necessary means that they will have the baby(happened to a few of my clients)... My understanding here is that the lender picked up the pregnancy part during their conversation and use this as an exit strategy which is wrong! it is one thing to be pregnant and one totally other thing to be on maternity!!! Looking at the strength of the file with credit and income being good, the pregnancy was not suppose to be a reason for decline! The work visa might be an issue but I totally agree with the broker here.

  • Toronto Broker on 2014-04-08 3:28:51 PM

    Never give any more information than a lender asks for, if there is not a request in writing on the commitment, then the lender doesn't need to know anything else.
    If they wanted to know more, they would ask.
    I hope a lesson was learned through this experience.

  • WiseGuy on 2014-04-08 5:59:47 PM

    Wisdom comes from experience and there's probably a lesson in this for brokers.

  • Seriously? on 2014-04-08 6:14:07 PM

    For those siding with the lender - right on! Credit is a "PRIVILEDGE" for which you have to qualify, not a right. The applicant that is pregnant is currently a non-permanent resident. No, they don`t qualify for EI until they are a Canadian citizen or permanent resident. Absolutely the lender has to evaluate the risk inherent in the situation and determine whether this fits within their risk tolerance. This is not about someone being pregnant - this is about RISK. And by the way, Ed - what an ignorant statement to make. Should lenders incorporate the "chance" of a woman miscarrying as they underwrite an application? absolutely ridiculous!!!! Kent, Pamela, Val and Ron - You are spot on!

  • Ron Butler on 2014-04-08 6:23:32 PM

    I gave a qualified response, the lender does have the right to set the rules, end of story but with defaults at 0.36% sometimes it is better to get out of the way of very bad PR and let's face it; if the deal is conventional at a balance sheet outfit the lender has the discretion to make a ratio exception.

    At the end of the day brokers should be realistic and respectful of who's money is at risk but we also must be the public's champion with the lender, I never see anything wrong with asking for an exception even if there is only a slim chance of getting it.

  • Pamela Wyant on 2014-04-08 6:33:06 PM

    There is also the small obligation of disclosing any material information which would affect the lenders decision. I'm assuming that's a national requirement which applies in Toronto & is not just applicable in BC. In my opinion, something like this falls into that category. Ask for an exception certainly & provide full supporting details so they are able to review it fairly, but my recommendation is: don't forget the disclosure if you wish to retain the lender relationship.

  • Ed on 2014-04-09 10:46:40 AM

    @Seriously? If you read my statement again, I clearly said that the lender should've focused on the work visa aspect and the other criteria... The lender FIRST response should not be declined because pregnant... Even if she has the baby, not all women go into maternity for a year long either! You have your facts and I have mine. Cheers

  • George Christopoulos on 2014-04-10 11:54:16 AM

    Not sure why the broker went public with this. Borrowing is a privilege and an lender, be it bank or private has the right to refuse a loan for whatever reason. Discrimination excluded.
    There are plenty of lenders that use mat leave BUT it is not uncommon for the people on mat or pat leave to NOT return to their job so they can collect the full benefits.
    Add what if the work Visa is not renewed or landed status granted.
    When I broke into the business as an underwriter the question we asked ourselves was "would you lend your money to this person"
    Lots of fuss about nothing

  • Nick D. on 2014-04-10 1:21:33 PM

    How do we actually KNOW that the lender declined it becasue she was pregnant? We only have the word of the broker - who is in truth just trying to use the publicity angle to get the deal approved. The fact is that the client is not a permament resident and is here on a work visa – that alone changes things. The fact that her income will be dropping – regardless of the reason – is important for the lender to know. If the clients cannot service the mortgage on the reduced income then it is reasonable that the lender should have concerns over the risk associated with the approval of the mortgage. The client will potentially out of the workforce for a period of 12 months. How are they going to maintain the home during that period with the very high costs of having a new child? What happens if her work visa expires during that time? Anyone consider that remification? Perhaps the broker should think before going on a stupid public rant.

    This story is all about a broker who got a decline that is trying to sensationalize the situation and force the lender into approving a deal. If I was that lender, this deal would not only be declined, the broker would be cut off for life from ever sending business to me again. Why would I want to partner with a broker that is so quick to throw me under the bus?

    Brokers wonder why lenders get so frustrated… as someone who used to once underwrite for a lender, I can tell you this… brokers are BY FAR the most difficult to deal with. 1000% more difficult than dealing with the consumer directly. I have yet to meet a broker that at one time or another has not been rude to an underwriter because they could not get their way. I can name several that have yelled at underwriters, some of them have posted on this very string of comments. This is just another case of a broker being elitist and ranting because they could not get their way – and shame on them for doing it.

  • Carmelo,MTG Broker on 2014-04-13 7:09:24 PM

    there are NOT such things "person who applied to be a Canadian citizen...you become a Canadian Citizen after 3 years been a Permanent Resident of Canada and takes another 2 years to become a Canadian Citizen!!!...She is on a WORK PERMIT ,already 4 years ,this is the Max of Years allowed to stay in Canada.Applying for Permanent Residence not means been approved as Permanent Resident!! Keep low profile and try to get a approval ,not to fight against the Lenders....customers comes and goes ,not the Lenders !!! 20 years in this business

  • Ottawa Broker on 2014-04-14 6:18:50 PM

    Sour grapes from an agent that got a decline from a lender. I see no reason why the deal should have even been submitted.

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