FHFA finalizes rule on fair lending, language preference

The Federal Housing Finance Agency on Monday officially moved forward with a plan to codify  requirements related to fair lending and preferred language use in regulation.

The Fair Lending, Fair Housing, and Equitable Housing Finance Plans Final Rule originally proposed last year aims to make it tougher to roll back measures intended to encourage more equitable access to homeownership through Freddie Mac and Fannie Mae, the influential quasi-public mortgage investors it oversees, and the Federal Home Loan Banks.

Regular planning aimed at closing the racial homeownership gap and language preference form requirements are particularly important to preserve now given cost pressures in the market that could hurt some communities disproportionately, FHFA Director Sandra Thompson said.

"These initiatives are critically important at a time when housing affordability remains a persistent challenge," said Thompson in a press release, citing an issue expected to be a key determinant in the outcome of the federal election set for this fall.

The Trump White House worked to roll back several fair lending rules during its tenure and the Biden administration subsequently made an effort to reinstate them, suggesting that the issue could re-emerge as a differentiator between the parties in the latest presidential race.

Professional groups in the mortgage industry have had mixed reactions to the requirement for government-related entities the FHFA oversees to ask about borrowers' preferred method of communication and document any counseling consumers receive about their home purchases.

The Community Home Lenders of America has been supportive of the requirement in the past. The Mortgage Bankers Association has been more measured in its response, citing questions about whether there's enough public support for compliance through translation clearinghouses and other resources.

The Federal Housing Finance Agency also announced the creation of a new Division of Public Interest Examination on Monday.

The division will have "supervisory oversight of the agency's regulated entities in the areas of affordable housing, community development, diversity and inclusion, consumer protection, and fair lending," according to the FHFA.