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Trade Groups Oppose Language Option on URLA App

FHFA, GSEs reportedly considering change to loan application

June 9, 2016

By Mortgage Daily staff

Financial industry trade groups are questioning the regulator of Fannie Mae and Freddie Mac about potentially adding a language preference to the loan application.

A letter was sent from eight groups including the American Bankers Association, Mortgage Bankers Association and National Association of Federal Credit Unions.

The June 8 letter is addressed to Federal Housing Finance Agency Director Mel Watt. Fannie's and Freddie's chief executive officers were both copied in the letter.

According to the trade groups, Fannie, Freddie and FHFA are considering a last-minute addition to the new Uniform Residential Loan Application in the form of a question asking borrowers to indicate their language preference.

"Those organizations advocating for this requirement are recommending that the industry be required to communicate with borrowers in multiple (350) languages," a message about the letter states. "Ultimately, we suspect that the advocates would like to extend this requirement even more broadly to all communications between financial institutions and borrowers."

A spokeswoman for Fannie Mae referred Mortgage Daily to FHFA for any comment.

An FHFA spokeswoman said, "We have no comment at this time."

There was no immediate response from Freddie about a statement.

The trade groups are concerned that adding a language preference would raise numerous compliance questions under the mortgage rules of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Among the potentially impacted rules are Know Before You Owe, the Truth in Lending Act, Equal Credit Opportunity Act and the Fair Housing Act.

The letter highlighted how the Loan Estimate and the Closing Disclosure are only available in English and Spanish and no plans are known to expand them to other languages.

The groups want to know the extent of lender responsibility when another language is preferred, and what is considered sufficient translation.

With originations costs likely to rise, the letter questions what translation costs can be incurred as well as how they should be incurred, disclosed and defrayed.

There is concern that consumers who indicate a preference will incorrectly expect that all future communications will be in the preferred language -- including servicing communications.

Other concerns raised included providing an inferior means of obtaining and analyzing data, detracting from other more promising avenues and exposing lenders to liability.

"While we support a range of efforts to ensure that borrowers are well informed during the mortgage process, the inclusion of such a question on the redesigned form raises several serious compliance and legal concerns that strongly weigh against including it on the form or, at the very least, warrant a full vetting through a notice and comment process before its inclusion," the letter states.

The trade groups say that such a requirement would not only be challenging for the industry, but for regulators also.

Office of the Comptroller of the Currency regulation of federal agencies and federal branches requires accounts and records in English, the groups say.

The associations questioned organizations that advocate the proposal who are calling for banks to simply translate everything for the bank examiners and supervisors.

The groups questioned how the OCC could know the translations are accurate and complete.

"At this point, the inclusion of the subject question would only create confusion, uncertainty and potential liability," the letter concluded. "Given the implications across federal agencies, we urge the FHFA to abandon this proposal or, at the very least, seek broader inter-agency and stakeholder input before proceeding further with this addition to the URLA."

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