Washington, D.C. – U.S. Senators Catherine Cortez Masto (D-Nev.) and Bob Menendez (D-N.J.) led a group of 19 senators in calling on the Federal Housing Finance Agency (FHFA) to rescind its decision to remove a language preference question and housing counseling information from Fannie Mae and Freddie Mac’s Uniform Residential Loan Application (URLA). The FHFA’s decision to remove these sections from the URLA could reduce access to mortgage financing for limited-English proficient, mortgage-ready homebuyers and lead to serious financial repercussions.
Under the previous FHFA Director, a comprehensive rulemaking process recommended that lenders note the language preference of borrowers to make sure they were well served throughout the life of their loan. The mandatory form would also have required that mortgage-ready borrowers receive resources on housing counseling groups that speak their language to ensure borrowers understood their loans. Making note of the borrower’s language preference also informs future holders of the loan if the loans are sold.
“We know that many limited-English proficient borrowers experienced language barriers when they tried to get help from their servicers during the Financial Crisis. In some cases, such barriers prevented borrowers from taking advantage of loan modifications for which the borrower was eligible,” the senators wrote.
They continued, “We urge you to rescind your decision to remove the language preference question and housing counseling access information from the redesigned URLA and work to build on FHFA’s efforts to improve accessibility to mortgage loan products for diverse borrowers throughout the mortgage market.”
In addition to Cortez Masto and Menendez, the letter was signed by Senators Sherrod Brown (D-Ohio), Elizabeth Warren (D-Mass.), Amy Klobuchar (D-Minn.), Richard Blumenthal (D-Conn.), Ed Markey (D-Mass.), Bob Casey (D-Pa.), Mazie Hirono (D-Hawaii), Kirsten Gillibrand (D-N.Y.), Kamala Harris (D-Calif.), Bernie Sanders (I-Vt.), Ben Cardin (D-Md.), Tina Smith (D-Minn.), Cory Booker (D-N.J.), Jeff Merkley (D-Ore.), Ron Wyden (D-Ore.), Chris Van Hollen (D-Md.) and Patty Murray (D-Wash.).
The letter is supported by UnidosUS, the NAACP, National Housing Resource Center, Leadership Conference on Civil and Human Rights, National Fair Housing Alliance, Center for Responsible Lending, Americans for Financial Reform, National Coalition for Asian Pacific American Community Development (National CAPACD), and the National Consumer Law Center (on behalf of its low-income clients).
A full copy of the letter can be found HERE and below:
Dear Director Calabria,
We write to express our concern that the Federal Housing Finance Agency (FHFA) directed Fannie Mae and Freddie Mac (the GSEs) to remove the language preference question and information about housing counseling and homeownership education information from the redesigned Uniform Residential Loan Application (URLA) which was scheduled for mandatory use beginning on February 1, 2020. We ask you to reconsider your decision so that the language preference question and housing counseling agency information are included in the redesigned URLA, not a voluntary second form.
In November 2017, FHFA decided to place the language preference question and housing counseling agency information on the redesigned and revised URLA. FHFA’s decision resulted from a years-long effort to better fulfill FHFA’s statutory mandate to deliver access to credit across diverse markets and support homeownership opportunities to mortgage-ready borrowers. As you know, the revised URLA was carefully crafted in a thoughtful multi-year process by staff from the FHFA, Fannie Mae and Freddie Mac to include the language preference question and housing counseling agency information. FHFA received hundreds of public comments in support of these additions. FHFA responded to public feedback through the Request for Information by noting that the language preference question and housing counseling agency information are integral to the GSEs’ goal of improving access to mortgage loan products and credit for a growing and diverse segment of America’s housing finance market. Communities with larger limited English proficiency populations have lower homeownership rates.
Although some in the mortgage industry expressed concern about the language preference question due to perceived legal liability and uncertainty, FHFA and the Consumer Financial Protection Bureau (CFPB) took the necessary legal steps to clarify that identifying borrowers’ language preferences is vital industry data collection and does not create new risk of an Equal Credit Opportunity Act (ECOA) or other fair lending violations. ECOA prohibits withholding loan products or offers based on language preference (e.g. discrimination on the prohibited basis of national origin). Failing to provide translation or non-English assistance based on a borrower’s stated preference fails to rise to an ECOA violation, which the CFPB affirmed when it officially approved the revised URLA in 2017. In fact, even without asking about a borrower’s language preference, lenders could face legal liability for failing to adequately disclose loan terms.
The revised URLA language preference section clearly informed borrowers that selecting a non-English preference would not guarantee service in that language. In fact, the section explicitly stated that the “loan transaction is likely to be conducted in English” regardless of the borrower’s selection and that communications in the preferred language may not be available. The section further listed housing counseling agency information so that borrowers could access language resources through HUD-approved counseling agencies. Therefore, the concern expressed by some industry groups that asking borrowers to select a language preference creates impractical consumer expectations is without cause.
That is why it is so surprising that the FHFA has now arbitrarily decided to remove this basic data collection point from the URLA and place it on a voluntary form. Voluntary forms are not adequate disclosures. Lenders will be under no obligation to use the new, voluntary form, and it is unclear how many will elect to do so. This will result in disparate treatment among borrowers who use different lenders. Additionally, there is no guarantee that the voluntary form will remain with the loan file. This leaves subsequent loan servicers without basic communication information about their borrowers. We know that many limited-English proficient borrowers experienced language barriers when they tried to get help from their servicers during the Financial Crisis. In some cases, such barriers prevented borrowers from taking advantage of loan modifications for which the borrower was eligible. The voluntary form will also undermine any efforts to collect market-wide data on language access needs. Without this vital information, policymakers and lenders will once again be left wondering how well the market is truly serving diverse borrowers.
The revised URLA was an important step toward increasing language access throughout the mortgage market. Access to sustainable, affordable homeownership is critical for underserved and limited English-proficient borrowers. Ultimately, it is in the commercial interest of all those working in the mortgage market to prepare to serve all mortgage-ready borrowers.
We urge you to rescind your decision to remove the language preference question and housing counseling access information from the redesigned URLA and work to build on FHFA’s efforts to improve accessibility to mortgage loan products for diverse borrowers throughout the mortgage market. We look forward to your response by November 18, 2019.