A group of nearly 20 top Senate Democrats, including five who are currently running for president, want the Federal Housing Finance Agency to undo a set of recently proposed changes to the new Uniform Residential Loan Application, claiming the changes could reduce access to credit for mortgage borrowers who are already underserved.
Back in August, the FHFA directed Fannie Mae and Freddie Mac to make changes to the new URLA form and delayed the mandatory use of that form from Feb. 1, 2020, to an unspecified date in the future.
The implementation of the new form would have brought the three-plus-year development of the form to a close after more than 20 years of the government-sponsored enterprises using the same form.
But with the deadline looming in early 2020, the FHFA announced earlier this year that it would be delaying the implementation deadline and ordered the GSEs to remove the language preference question and housing counseling information from the updated URLA form.
As part of the change, the language preference question and the homeownership education and housing counseling question were to be moved to a separate voluntary form.
But a group of Senate Democrats, led by Sens. Catherine Cortez Masto, D-Nev., and Bob Menendez, D-N.J., want the FHFA to rescind those changes.
In a letter sent to FHFA Director Mark Calabria, 19 Senate Democrats call on the FHFA to keep the language preference question and housing counseling information on the main URLA form, as it was when the URLA originally redesigned in 2016.
Joining Cortez Masto and Menendez in sending the letter are Sens. 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.
According to Cortez Masto’s office, the senators believe the decision to move those sections to a separate form “could reduce access to mortgage financing for limited-English proficient mortgage-ready homebuyers and lead to serious financial repercussions.”
The changes, specifically the removal of the language preference question, were supported by the Mortgage Bankers Association and other groups.
“As you recall, MBA opposed the inclusion of the language preference question in the URLA because of the customer relations issues the question would cause if lenders could not actually serve borrowers in their preferred language, and due to unresolved operational and legal questions raised by the language preference information,” MBA President and CEO Bob Broeksmit said in a letter to MBA members earlier this year.
In their letter, the senators note that the mortgage business’s concern over the language question may be overblown.
“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,” the senators write.
“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,” they continue.
“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,” they add.
Beyond that, the senators argue that the revised URLA language preference section “clearly informed borrowers that selecting a non-English preference would not guarantee service in that language.”
That’s why, in the senators’ view, it was “surprising” to see the FHFA “arbitrarily” decided to make the changes to the form.
“Voluntary forms are not adequate disclosures,” the senators write. “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, the senators believe the removal of the language preference question will have a negative impact on the borrower and the mortgage servicer after the loan is closed.
“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,” the senators write.
“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 continue. “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 senators also want the housing counseling information restored to the main URLA form, to ensure that “mortgage-ready borrowers receive resources on housing counseling groups that speak their language to ensure borrowers understood their loans.”
The senators close their letter by stating that both borrowers and the housing business would be helped by the GSEs reverting back to the originally proposed URLA form.
“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,” the senators write.
“Ultimately, it is in the commercial interest of all those working in the mortgage market to prepare to serve all mortgage-ready borrowers,” they conclude. “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.”
The senators’ letter is supported by the UnidosUS, 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, and the National Consumer Law Center (on behalf of its low-income clients).
To read the senators’ letter in full, click here.