Language question added to the loan app against lenders' wishes

The Federal Housing Finance Agency added a language preference question to the loan application, rejecting the mortgage industry's wishes.

Consumers with a limited understanding of English will be able to choose a preferred language they wish to communicate in on the mortgage application.

However, a disclosure will state that the mortgage transaction is likely to be conducted in English even if another language is chosen and that language's resources may not be available.

When the FHFA revised the URLA in August 2016, it decided not to add a language question. However, in May it revived the idea with a request for public input.

In July, the Mortgage Bankers Association, along with the American Bankers Association, Consumer Bankers Association and the Housing Policy Council of the Financial Services Roundtable sent a joint response to the FHFA opposing adding this question.

The MBA was somewhat mollified by the changes the agency made to the final version of the question.

"The 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, the MBA's senior vice president for residential policy and member engagement.

"While we continue to have significant reservations about including a language preference question on the URLA, we appreciate the modest improvements the FHFA has made in response to industry feedback and concerns about the GSEs' consumer testing. We are committed to working with the FHFA, the enterprises and other government agencies to continue developing resources to aid LEP borrowers."

Fannie Mae and Freddie Mac will publish a separate disclosure translated into several languages that further informs borrowers about the nature of available language resources. Use of this disclosure will be optional for lenders, the FHFA said.

The agency "has committed to improving the ability of all mortgage-ready borrowers to understand and participate fully in the mortgage process," said Director Mel Watt in a press release. "Adding a preferred language question to the Uniform Residential Loan Application will enable mortgage industry participants to connect limited English-proficient borrowers to available language access resources. This will support access to credit for a growing segment of the nation's housing finance market."

The new question will provide the borrower with eight choices including six languages: English, Chinese, Korean, Spanish, Tagalog and Vietnamese along with other (followed by a blank space) and I do not wish to respond. California already requires a written translation if the negotiations for a business transaction (including a mortgage) are conducted in any those languages.

"FHFA made a great decision," said Amanda Jackson, the organizing and outreach manager for the Americans for Financial Reform. "Knowing homeowners' preferred language will help Fannie, Freddie and mortgage servicers better communicate with their customers and avoid unnecessary — and sometimes devastating — confusion."

Fannie Mae and Freddie Mac will publish a redesigned application form by the end of this year.