MBA, Trade Groups Again Ask FHFA to Drop Limited English Proficiency Question

The Mortgage Bankers Association and other industry trade groups reiterated their opposition to a Federal Housing Finance Agency proposal on addressing home borrowers with limited English proficiency that would require mortgage lenders and servicers to ask a borrower’s preferred language on the Uniform Residential Loan Application.

In the July 31 letter to FHFA Director Melvin Watt, MBA, the American Bankers Association, the Consumer Bankers Association and the Housing Policy Council of the Financial Services Roundtable said such a question, under consideration by FHFA as part of a Request for Information on issues faced by qualified borrowers with limited English proficiency

“We believe that its inclusion prior to resolution of the concerns enumerated below will mislead borrowers, increase costs for consumers and open lenders, servicers and secondary market investors to possible legal liability,” the letter said. “It is more appropriate, and more beneficial for potential LEP borrowers, that future efforts determine where additional resources should be deployed and where regulatory gaps may exist. Far more guidance and clarification–not the inclusion of a question on the URLA–will meaningfully address the needs of LEP borrowers.”

In August 2016, FHFA decided not to include a question regarding borrower language preference on the URLA after consideration of a variety of means by which to improve access to credit for LEP borrowers. Instead, FHFA announced a series of steps to begin addressing some of the unresolved issues related to this topic. These steps included additional surveying of borrowers through FHFA’s existing and ongoing surveys, issuance of an RFI and collaboration with stakeholders at other government agencies and with industry and consumer representatives.

MBA and the trade groups said they strongly support efforts to better understand the unique challenges relevant to LEP borrowers and to better serve the LEP population with safe, sustainable, and affordable mortgage credit.

“To further these objectives, we believe the best course of action for FHFA, other government agencies, Fannie Mae and Freddie Mac (the Enterprises), lenders, servicers, and other interested stakeholders is the pursuit of a holistic strategy that identifies LEP-specific barriers to homeownership, allocates resources to reduce these barriers in a cost-effective and practical manner and minimizes confusion among all parties, including LEP borrowers,” the letter said. “We understand this RFI to represent the beginning of this process, and we look forward to identifying ways to improve the mortgage finance system infrastructure to better accommodate LEP borrowers.”

The letter noted that while the trade groups appreciate FHFA’s stated position that the inclusion of such a question “not create new obligations or liabilities for the originator, servicer, or other parties, not create new rights for borrowers, and not create borrower expectations that the transaction will occur in a language other than English,” such a question would mislead borrowers, increase costs for consumers and subject lenders servicers and investors to potential legal liability.

“It is more appropriate, and more beneficial for potential LEP borrowers, that future efforts determine where additional resources should be deployed and where regulatory gaps may exist,” the letter said. “Far more guidance and clarification–not the inclusion of a question on the URLA–will meaningfully address the needs of LEP borrowers.”

MBA and the trade groups requested FHFA, Fannie Mae and Freddie Mac not include a question regarding borrower language preference on the URLA at this time, and instead “work expeditiously with our members and the relevant government agencies to develop a comprehensive action plan to efficiently and effectively provide LEP borrowers with greater access to sustainable mortgage credit.”

“Our associations appreciated this decision, as we believed–and continue to believe–that further progress must be made on numerous practical and legal concerns before it is appropriate to consider amending application materials such as the URLA,” the letter added. “In particular, the use of surveys by FHFA or the Enterprises, in conjunction with the Consumer Financial Protection Bureau, to obtain more information specific to potential LEP mortgage borrowers represented a positive development.”