MBA, Trade Groups Cite Concerns over FHFA Loan Application Additions
The Mortgage Bankers Association and more than a half-dozen industry trade groups, in a letter to Federal Housing Finance Agency Director Mel Watt, expressed reservations about a potential last-minute addition to the new Uniform Residential Loan Application.
The letter notes that FHFA, as well as Fannie Mae and Freddie Mac, are considering a last-minute addition to the new URLA, which is scheduled to go into effect June 13. The question specifically asks borrowers to indicate their language preference.
MBA and the trade groups said while seemingly innocuous, the proposed question has enormous implications.
“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 letter cites eight concerns:
—Require Lenders to Ask Borrowers Sensitive Questions Before the Interactions and Implications of Other Rules are Understood and Addressed. The letter said inclusion of a language preference question raises numerous compliance questions under the Dodd-Frank mortgage rules including Know Before You Owe, the Truth in Lending Act, Equal Credit Opportunity Act and the Fair Housing Act.
—Create Expectations Among Consumers that Can’t Be Met. The letter noted consumers who provides language preference information at the lender’s request will reasonably expect that they will receive communication in such language-despite an estimated 350 languages spoken in the United States. “At this point, no rules [exist] that guide lenders on what they should do in light of a borrower’s response,” the letter said.
—Provide an Inferior Means of Obtaining and Analyzing Data. The letter noted Census, American Housing Survey or the National Survey of Mortgage Borrowers and Home Mortgage Disclosure Act data offer much broader-based datasets on homebuyers and prospective homebuyers for public policy analysis. “If data is to be gathered, it should reside in one of these datasets and it should be collected and reported in accordance with their requirements,” the letter said.
—Detract from Other More Promising Avenues. “More promising approaches would involve the FHFA working with the CFPB, HUD and other agencies to determine a government-wide approach to limited English proficiency consumers in the mortgage process and in the marketplace generally,” the letter said.
—Potentially Expose Lenders to Liability. The letter said if the borrower indicates a non-English preference and the lender does not proceed in that language, the lender may expose itself to Unfair, Deceptive and Abusive Acts and Practices liability. “Merely asking the question also may open the lender to the charge that it has used language preference as a proxy to learn more about the ethnicity of the borrower than the other government monitoring information may allow,” the letter said.
—Open Both Lenders and Borrowers to Considerable Origination Costs. The letter said no cost/benefit analyses of the costs of including this question has taken place, considering that the costs of providing translation services potentially in all languages.
—Open Servicers to New Obligations and Increase Borrowers’ Servicing Costs. The letter said such language would increase the cost of servicing and necessitate adjustments to those rules as well.
—Require Translation Services Without Accompanying Government or GSE Materials. The letter noted while the Loan Estimate and the Closing Disclosure are available only in English and Spanish, there are no apparent plans to expand the language offerings for these documents or to translate the accompanying Homebuyers Toolkit into other languages.
“At this point, the inclusion of the subject question would only create confusion, uncertainty and potential liability,” the letter said. “Given the implications across federal agencies, we urge the FHFA to abandon this proposal or, at the very least, seek broader interagency and stakeholder input before proceeding further with this addition to the URLA.”
Joining MBA in the letter: the American Bankers Association; the Consumer Bankers Association; the Consumer Mortgage Coalition; Credit Union National Association; the Housing Policy Council; the Independent Community Bankers of America; and the National Association of Federal Credit Unions.
