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.