saw the top story today about the bank penalized for telling a person on maternity leave "with full pay" that her application would have to wait until she returned to work.
The question has come up....what if...the person on maternity leave was not getting full pay...say half pay - can you tell her to wait until she is drawing full pay before you process (or I assume deny because her 1/2 pay income is not sufficient)?

If the income is not sufficient for the loan, it would be denied due to insufficient income. I would NEVER advise an institution to make any statements regarding returning to full status during maternity leave. That is a Quick trigger to get a violation and give the applicant free money.

thanks - but my concern with denying it on income is it is only one step removed from waiting until she returns to work.

"your denied unless you can double your income."
"I can double my income when I return to work after maturnity leave."
"Great we will process your application then. "

"You're denied due to insufficient income."
"My income will increase once I return to work following my maternity leave."
"Great! Please re-apply once your income is higher and we will be happy to work with you."

That's what I'd do. You still turn this one down due to insufficient income - regardless of why, she doesn't make enough at application to pay for this loan.

If the applicant has a history at this job with her higher income in previous years, could we request a VOE to confirm rate and hours and the date when the applicant is expected to return to work?

IMHO, bordering on semantics - if you turn them down and have them re-apply when going back to work, it should not be an issue. If you do that, it better be in policy and for everyone who is having a temporary reduced income.

What does the bank do for teachers over the summer?

Our procedure for partial pay maternity leave is to calculate the income based on current income. and deny if income is insufficient.
we would not request a VOE to confirm rate and hours and calculate on expected date of return. Our logic is- what if the applicant decides not to go back to work? so we use the information available at the time of application, just like any other application.

https://www.fanniemae.com/content/guide/selling/b3/3.1/09.html FNMA guidance on temporary leave income was helpful to us in the past. I believe Freddie is similar.

In order to give the borrower the benefit of not having to re-apply, decision your loan with the condition that it cannot close until you have a paystub confirming her back to work. However, that is only if she does not qualify at the current income being received.

I concur that if the borrower IS receiving any income from that employer, full to whatever percentage, and they qualify, then you make the loan with a letter from the employer that she will be returning at at least the level of income or greater and on what date, coupled with a signed intention letter from the borrower.

You are NOT bound by FNMA or FHLMC rules, meaning you can be overly cautious. They issue guidance on what they will accept. They do not legislate that you follow the rules, without overlays. The issue lies if you become disparate in your underwriting and lending or you go against your companies written policies.