House Members Back MBA, Trade Groups on FHFA Language Issue

Fifty-four members of the House, in a letter to Federal Housing Finance Agency Director Mel Watt, urged the agency to exclude from its new Uniform Residential Loan Application a question asking borrowers to indicate their language preference, saying that FHFA should work with Congress, federal agencies and industry in developing a “comprehensive approach” to address mortgage consumers with limited English proficiency.  

“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 letter comes amid concerns from the Mortgage Bankers Association and other industry trade groups, which in June sent Watt a letter (file:///C:/Users/msorohan/Downloads/Joint Trades Letter on URLA Language Preference_6_8_2016.pdf) expressing reservations about FHFA’s proposed last-minute addition to the URLA. FHFA, as well as Fannie Mae and Freddie Mac, have indicated they plan to include the question, which specifically asks borrowers to indicate their language preference.  

“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.  

The MBA/trade groups letter cited eight specific concerns:

–It requires lenders to ask borrowers sensitive questions before the interactions and miplications of other rules are understood and addressed;

–It creates expectations among consumers that can’t be met;

–It provides an inferior means of obtaining and analyzing data;

–It detracts from other more promising avenues, such as FHFA working with the Consumer Financial Protection Bureau, HUD and other agencies to determine a government-wide approach to limited English proficiency consumers in the mortgage process;

–It potentially exposes lenders to legal liability;

–It opens both lenders and borrowers to “considerable” origination costs;

–It opens servicers to new obligations and increases borrowers’ servicing costs; and

–It would require translation services without accompanying government or GSE materials.  

MBA and the trade groups urged FHFA in the letter to abandon the proposal or, at the very least, to seek broader interagency and stakeholder input going forward.  

The letter from Congress agreed, pointing out that no federal rules currently exist to guide lenders in responding to a consumer’s language preference, in light that nearly 350 languages are spoken in the U.S.  

“As a result, this seemingly simple question can mislead consumers and raise numerous complex compliance questions under a variety of laws governing mortgage providers,” the letter said. “Accordingly, we strongly urge FHFA to exclude any question about foreign language preference or usage from the URLA at this time.”