The Situation
Simone is on maternity leave, earning 60% of her usual salary through Employment Insurance. She and her spouse have saved a 20% down payment and together earn sufficient income to qualify for a $400,000 mortgage on a $500,000 home. Their current lender denied the mortgage application, citing "insufficient income" as the reason.
The lender only counted Simone's reduced maternity leave income (60% of normal), not her regular full-time income returning when leave ends. The lender's denial letter stated: "Applicant's current income of $32,000/year is insufficient for the requested mortgage amount. Conditional income sources are not counted."
Human Rights in Lending
Canadian human rights law prohibits discrimination in lending based on sex, gender, family status, or other protected grounds. Denying mortgages because applicants are on parental leave, are pregnant, or have dependent children constitutes illegal discrimination in most provinces.
Relevant human rights statutes:
- • Canadian Human Rights Act (s. 2-3): prohibits discrimination based on sex and family status in services and transactions
- • Ontario Human Rights Code: protects against discrimination in accommodation based on sex and family status
- • BC Human Rights Code: prohibits discrimination based on sex, family status, and marital status
- • Alberta Human Rights Act: protects against discrimination based on gender, family status, and pregnancy
Lenders are permitted to count only current income in qualifying calculations. However, they cannot arbitrarily exclude legitimate future income or income sources simply because the applicant is on temporary leave.
The Conversation (With Lender)
Simone requested to speak with the lending manager about the denial:
Simone:
"I was denied the mortgage because my current income is too low. However, I'm on maternity leave and will return to my full-time position in six months at $53,000/year. Why isn't my returning salary considered?"
Lending Manager:
"Our underwriting guidelines require applicants to qualify on current income only. We don't make assumptions about future income from parental leave, as there's no guarantee you'll return or that your employer will rehire you."
Simone:
"I have a written letter from my employer confirming my return date and salary. I've been with the company for eight years. I'm not assuming anything—my income is contractually guaranteed. And my spouse's income alone qualifies us for the mortgage anyway."
Lending Manager:
"Let me review your spouse's income separately. If your spouse qualifies as the sole applicant, we could approve the mortgage. But as currently structured with both incomes, the combined application doesn't meet our criteria."
Filing a Complaint
Simone has options to challenge the mortgage denial through human rights bodies and financial regulators. If she believes the denial was discriminatory, she may file a complaint.
Canadian Human Rights Commission (Federal)
The CHRC accepts complaints alleging discrimination based on sex, family status, or other grounds under the Canadian Human Rights Act. The process is free to complainants and investigates whether the lender's actions violated human rights law.
Provincial human rights bodies
Each province has a human rights tribunal or commission. Ontario's Human Rights Tribunal, BC's Human Rights Commissioner, and Alberta's Human Rights Commission accept complaints of lending discrimination. Filing is generally free.
Financial regulators
The Office of the Superintendent of Financial Institutions (OSFI) and provincial financial regulators receive complaints about lender conduct. While these agencies focus on systemic compliance, they track discriminatory lending patterns.
Small claims court (civil remedy)
Simone could pursue a civil claim against the lender for discrimination and damages. Damages may include lost opportunities, emotional distress, and mortgage costs at higher rates from alternative lenders. Civil courts can award both compensatory and punitive damages.
Alternative Lenders
While pursuing a complaint, Simone should explore alternative mortgage sources:
Credit unions and regional banks
Credit unions and smaller regional banks often have more flexible underwriting criteria. They may consider returned income based on employer letters and are less restrictive about parental leave income.
Mortgage brokers
Brokers represent multiple lenders and can shop Simone's application widely. Some lenders work exclusively through brokers and have more flexible policies regarding leave income and employment situation.
Alternative lenders
Private lenders and mortgage investment companies may approve mortgages with higher rates if prime lenders refuse. This should be a last resort given higher costs, but may be necessary temporarily until Simone returns to full-time work.
Key Takeaway
Mortgage denials based on parental leave status or reduced temporary income may constitute illegal discrimination under human rights law. Applicants should provide documentation of guaranteed return-to-work status and regular income resumption. If a lender applies underwriting rules that systematically disadvantage those on parental leave, human rights complaints may be warranted. Don't accept the first denial—shop multiple lenders, use mortgage brokers, and consult a lawyer about your rights if you believe discrimination occurred. Pursuing a human rights complaint may take time, but it establishes a record and may recover damages or force the lender to reconsider the application.