After a period of consumer testing and requests for input, the FHFA announced on October 20, 2017, that a borrower preferred language question will be added to the revised Uniform Residential Loan Application (URLA). The final redesigned URLA will be published by Fannie Mae and Freddie Mac by the end of 2017, may be used by lenders starting July 2019, and will be mandatory for new Fannie Mae and Freddie Mac loan applications starting February 2020. Inclusion of the preferred language question is part of the FHFA’s long-term goal of improving language access to the mortgage market for limited English proficiency (LEP) borrowers, but it has raised concerns for participants in the industry, particularly those who are still contemplating how best to serve LEP borrowers with the resources available to industry participants both on their own and from relevant government agencies.
Based on feedback from the testing and comments received, FHFA modified the language included in both the preferred language question and related instructional/informational language around it. The preferred language question gives applicants the option to select one of the following languages they would prefer, if available: English, Chinese, Korean, Spanish, Tagalog, Vietnamese, or Other (with a line to write in that response). The language around the question attempts to make clear to applicants that their loan transactions are likely to be conducted in English, communications may not be available in their preferred language, and selection of a language other than English does not mean that the industry participants working on the transactions will communicate or provide documents in that language.
However, the accompanying language also indicates that this question will help the lender or other loan participants assist the applicant or direct the applicant to those that can assist the applicant. Though intended to make clear that selection of the preferred language does not mean that any portion of the loan process will be conducted in a language other than English, there is a possibility that this latter language, even in its revised form, could cause an expectation on behalf of the applicant that the lender will provide guidance and/or forms in the preferred language. Thus, this may continue to raise concerns for those lenders (or industry participants later involved with these loans, such as loan purchasers or servicers) that still are trying to determine how best to address loans involving LEP borrowers. It also emphasizes the importance to the industry of addressing these LEP borrower issues on a broader scale as soon as reasonably possible to be prepared for the roll-out of the revised URLA language as well as the related regulatory implications of how such borrowers are treated, such as with regard to fair lending.
To potentially mitigate some of these concerns, in addition to the clarification language regarding likelihood of use of English in the transaction, the question on the URLA also is followed by instructions for housing counseling agency contacts where the applicant may be able to receive language assistance and resources. The FHFA announcement also indicates that Fannie Mae and Freddie Mac will publish separate disclosures that are translated into different languages to help let borrowers know about available language resources. Lenders have the option as to whether they would like to use those separate disclosure.
The FHFA’s announcement and the preferred language question can be found at: https://www.fhfa.gov/Media/PublicAffairs/Pages/Preferred-Language-Question-to-be-Added-to-the-Redesigned-Uniform-Residential-Loan-Application.aspx.