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Blog: FHFA proceeds with language-preference question

The Federal Housing Finance Agency (FHFA) earlier this month announced it will include a language question on the standard application form used by borrowers to apply for Fannie Mae and Freddie Mac loans.

The decision was a victory for some consumer-advocacy groups that have said this tweaking of the form would provide the federal government and the public with much-needed data on non-English speaking borrowers, as well as help lenders better serve this population.

regulationformIt was a loss for mortgage banking groups that are concerned that once lenders start asking about borrowers' language-speaking preferences, it will potentially open up a Pandora's box of legal obligations requiring the industry to serve borrowers in scores of different languages.

FHFA has gone back and forth on whether to include a language question for more than a year, while engaged with the government-sponsored enterprises (GSEs) on the first major redesign of the standard form (known as the uniform residential loan application, or URLA) in 20 years. After first announcing it would include the question, FHFA pulled back, announcing it was reviewing the change. On Oct. 19, after seeking industry input, however, FHFA again announced it was going forward with the change.

Lenders can begin to use the newly designed form starting in July 2019, but it won’t become mandatory until February 2020.   

In his speech at the Mortgage Bankers Association’s (MBA) national convention in Denver last week, FHFA Director Mel Watt acknowledged that the decision to include the language-preference question wouldn’t be popular in the industry. FHFA has made some revisions from its original proposal that are intended to address the legal concerns raised by the industry. The new language will include the caveat that the companies are under no obligation to serve the borrower in their preferred language.The GSEs will publish a separate disclosure translated into several languages that explains the available language resources.

Watt also noted that this was the most natural time to include such a question, given that the form is being revised now.

“It is unlikely to be updated again anytime soon,” Watt said. “We concluded that this was the right time to start having borrowers make this important information available to lenders and that making this change now will reduce the prospect of another expensive retooling of the enterprise and industry systems in the future. In the long run, I think we will all find that both the decision and the timing of it will be beneficial.”   

Supporters of the change, like the National Consumer Law Center, applauded the decision as another step forward. Since the Oct. 19 announcement, the mortgage industry hasn’t said much.

MBA issued a brief statement after the announcement.   

“MBA and its members are committed to serving all borrowers in a safe and sustainable manner, including those with limited English proficiency,” said Pete Mills, senior vice president for residential policy and member engagement. “While we continue to have significant reservations about including a language preference question on the [the standard form], we appreciate the modest improvements FHFA has made in response to industry feedback and concerns about the GSEs' consumer testing.”

MBA has been making a push to promote a more diverse workforce that may better be able to serve non-English speaking borrowers. As an alternative to including a language question on the form, the trade group has said it would support the development of a national database for translation services. 


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