WASHINGTON, D.C. - A group consisting of 20 Senate Democrats, including five Presidential contenders, have called on the government to keep a “vital language preference question" on the Universal Residential Loan Application (URLA) form.
Led by Senators Catherine Cortez-Mastro (D-Nev) and Bob Menendez (D-NJ), the group said in a letter to government officials that the decision to remove the question “could reduce access to mortgage financing for limited-English proficient mortgage-ready homebuyers and lead to serious financial repercussions”. Joining Cortez Masto and Menendez in sending the letter are presidential candidates, Elizabeth Warren, D-Mass., Amy Klobuchar, D-Minn, Kamala Harris, D-Calif., Bernie Sanders, I-Vt.; Cory Booker, D-N.J.
The Federal Housing Finance Agency (FHFA) has proposed the removal of the language preference question on the URLA. The URLA is the “industry standard form used by nearly all mortgage lenders” according to Investopedia.
Typically, when a borrower applies for a home loan, lenders ask borrowers a number of questions about the nature of their finances and need for a loan. Under the proposed rule change, lenders would not be required to ask borrowers what their preferred language is.
Limited English proficient families were frequent victims of predatory lending leading up to the housing crash and subsequent financial collapse of 2008. The change moves the language to a voluntary form, meaning key data will not be collected and the information would not travel with the borrower’s mortgage package through the lending process.
A number of associations have raised alarm bells over the change as well.
According to the National Fair Housing Alliance (NFHA), “Language barriers continue to limit consumers’ access to affordable home ownership opportunities and hinder lenders’ ability to serve this market effectively[…]The inability of borrowers to speak English at all or well enough to complete a complicated financial transaction has a wider impact on their participation in the housing market because it exposes them to potential abuse and fraud.”
Groups, such as the Mortgage Bankers Association (MBA), the American Association of Banks (ABA), and the Credit Union National Association (CUNA) have supported removing the question. CUNA senior director of advocacy and counsel, Mitria Wilson, stated “We are grateful that the FHFA has reconsidered the inclusion of this question after recognizing the numerous compliance and other legal concerns raised by CUNA and other trade organizations.” The ABA mentions on their website, “that such a question was likely to confuse or mislead borrowers, and it previously raised concerns about the legal implications for lenders.”
The letter from the Senators points out, “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 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 or other fair lending violations.”
The NHFA cites three reasons to ensure the language question is kept on the URLA. First, this additional form would be completely voluntary, meaning if borrowers do not use it “key information about a borrower’s language will not be collected, creating barriers to access in-language services and resources”. Second, as the URLA is used for virtually all mortgage applications in the US, including the question will integrate it into the mortgage lending process. Third, the URLA remains in the loan file throughout the mortgage process. “The proposed alternative form does not require that language preference information be integrated into the mortgage process or travel with the loan file”.
Additionally, in the House, Representative Al Green, D-TX, introduced on October 22, H.R. 4783: LEP Data Acquisition in Mortgage Lending Act to ensure the question is left on the URLA. Joining Representative Green are Rep. Judy Chu (D-CA), Rep Sylvia Garcia (D-TX), and Rep William Lacy Clay (D-MO).