FHFA Backs Away from URLA Language Question Provision

Sorohan, Mike msorohan@mba.org

August 04, 2016

In response to strong objections from the Mortgage Bankers Association and other industry trade groups, the Federal Housing Finance Agency said it would back away from a proposed question in its redesigned Uniform Residential Loan Application involving a customer's preferred language.

In a letter to MBA and nearly a dozen other trade groups, FHFA Director Melvin Watt said while the agency believed that addressing potential homeowners in languages other than English is an "important goal," inclusion of a question at this time was not practical.

"One means that FHFA has been actively considering to advance the goal of improving access for [limited English proficiency] borrowers has been to leverage the current redesign of the URLA to ask borrowers about their language preference," Watt wrote. "After studying this possibility carefully, however, we have concluded that there are a number of unresolved issues related to including the question on the redesigned URLA and that attempting to resolve all of those issues in the timeframe in which we are currently operating would unduly delay the 2016 roll-out of the new URLA and put the 2018 implementation date at risk. Consequently, FHFA has decided not to include a question about language preference on the new URLA at this time."

MBA and other trade groups, as well as members of Congress, had expressed strong concerns over inclusion over the LEP question. In a June letter to FHFA, MBA and the trade groups said inclusion of such a question would substantially increase lender costs, expose lenders to potential legal liability, provide an "inferior" means of obtaining and analyzing data and create expectations among consumers "that can't be met."

"While we support a range of efforts to ensure that borrowers are well informed during the mortgage process, the inclusion of such a question on the redesigned form raises several serious compliance and legal concerns that strongly weigh against including it on the form or, at the very least, warrant a full vetting through a notice and comment process before its inclusion," the letter said.

Additionally, 54 members of Congress sent a letter last month to Watt objecting to the question, saying that FHFA had exceeded its authority. "Addressing the needs of limited English proficiency consumers is an issue that extends well beyond the mortgage marketplace, and well beyond the purview of the FHFA," the letter said. "If there is going to be a questions about the consumer's language preference or other approach to help borrowers who lack English proficiency, they should only be proposed after all the relevant agencies have engaged in well-considered policy development and proposed rules for public comment."

The URLA currently in use as the industry-standard loan application has not changed materially in 20 years. FHFA's goal has been to finalize the new URLA by this summer in an effort to give lenders adequate time to prepare to implement the form in January of 2018 to coincide with the new Home Mortgage Disclosure Act data collection. But Watt conceded in his letter that inclusion of the question could upset the timeline.

Watt said FHFA will begin taking steps to gather "important data" on language preferences, including:
--FHFA will include additional questions about access to home financing and the servicing process for LEP borrowers on the National Survey of Mortgage Originations and the American Survey of Mortgage Borrowers;
--FHFA will issue a Request for Input to solicit feedback from stakeholders about the best ways to gather data about LEP borrowers and the languages they prefer and about the best ways for lenders and servicers to obtain the information necessary to be able to help LEP borrowers during mortgage origination and thereafter; and
--FHFA will collaborate more extensively with stakeholders at other government agencies and with industry and consumer representatives to explore ways to improve the mortgage origination and servicing experience for LEP borrowers.

"FHFA will review the information gathered using the above approaches and will expeditiously determine what steps are appropriate going forward," Watt said. "Throughout this process, FHFA will continue to be committed to a thorough review of LEP issues in an open and transparent way and we will continue to welcome your thoughts and input on how we can reach our mutual goal of increasing access to mortgage credit for LEP borrowers in the most effective and prudent manner."

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