Can a lender cancel or decline my loan since I am on approved leave?

UPDATED: Sep 29, 2022

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Can a lender cancel or decline my loan since I am on approved leave?

I am currently approved for family leave to bond with my newborn baby and am also trying to refinance my home with today’s low interest rate. The mortgage company that I am working with is threaten to cancel or decline my loan if I do not go back to work as soon as possible.

Asked on August 20, 2015 under Business Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 7 years ago | Contributor

Yes, the lender can do this. The "approved leave" has nothing to do with the loan--you are approved by your employer to take the time off from work and/or are using legally mandated leave from employment under the FMLA or similar state law but neither your employer's decision to voluntarly let you take leave nor government employment leave laws controls or binds a lender in any way.
More generally, lenders are not required to make loans they do so voluntarily, and they do so in the expectation of being repaid and making a profit. They are allowed to decline to lend to anyone who they feel is not a good credit risk, and they can make their own deterinations of who would be a good risk. In this case, the lender has determined that you are not as good a risk while taking an extended leave that is their determination and it is a reasonable and legal determination.
There is no right to refinance a mortgage if you want to do this, you have to satisfy your lender's criteria. That may mean making a choice between leave to bond with your newborn or going back to work early and refinancing.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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