Advocates Oppose FHFA’s Decision to Remove Language Preference Question from Loan Application
WASHINGTON, D.C. – The Americans for Financial Reform (AFR) Language Access Task Force strongly opposes the decision announced yesterday by the Federal Housing Finance Agency (FHFA) to remove the question about a borrower’s language preference from the revised Uniform Residential Loan Application (URLA). The Task Force members include the Americans for Financial Reform Education Fund, the Center for Responsible Lending, Connecticut Fair Housing Center, Consumer Action, Empire Justice Center, NAACP, National Coalition for Asian Pacific American Community Development (National CAPACD), National Consumer Law Center, National Council of Asian Pacific Americans, and National Fair Housing Alliance.
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“We are deeply disappointed that FHFA has suddenly decided to reverse course and set aside the thoughtful, inclusive, multi-year process that led to the decision to add a language preference question to the URLA.” said Linda Jun, Senior Policy Counsel at the Americans for Financial Reform Education Fund. FHFA crafted the language preference question after careful consideration and vetting over 200 public comments on its Request for Information. The decision was also based on research that FHFA conducted through the Kleimann Group, including focus groups with non-English-speaking consumers. The question on the URLA included a clear disclaimer that informs the applicant that the loan transaction “is likely to be conducted in English” and “communications may not be available in your preferred language.”
The importance of knowing the borrower’s preferred language became starkly evident during the foreclosure crisis, when a number of Task Force members were contacted by borrowers who were facing foreclosure because of problems related to language barriers. Some of these borrowers had received loans whose terms they did not understand and could not afford. Others were unable to get the help they needed from their servicers on a timely basis because those servicers were unaware of their language needs or ill-equipped to provide the necessary information in-language. As a result, these borrowers missed out on loan modifications for which they were eligible and lost their homes to foreclosure.
Language barriers continue to limit consumers’ access to affordable homeownership opportunities and hinder lenders’ ability to serve this market effectively. Indeed, the proportion of the US Limited English Proficient (LEP) individuals increased by 80 percent between 1990 and 2013, from 6 percent of the population to 9 percent. As of 2015, over 25.9 million people in the US are LEP. The inability of borrowers to speak English at all or well enough to complete a complicated financial transaction has a wider impact on their participation in the housing market because it exposes them to potential abuse and fraud. LEP consumers tend to have less education and lower homeownership rates. The first step toward expanding access to homeownership for these consumers is to create a standardized method to identify their preferred language, which is what the question on the URLA would do. Asking about a consumer’s language preference is a gateway to greater access to services in-language, but not a guarantee. It allows lenders and servicers to connect consumers to already-available services, and prompts the industry to expand those services when the data supports such an effort. As technology improves and more in-language resources become available, knowing a borrower’s preferred language will allow lenders to easily connect LEP consumers to those resources, which will benefit both the borrower and the lender.
Rather than including the question on the revised URLA, FHFA has proposed to place the language preference question on a separate form. This is an ineffective alternative for three reasons. First, unlike the URLA, the use of this additional form would be completely voluntary, and many lenders may choose not to use it. If the form is never used, key information about a borrower’s language will not be collected, creating barriers to access in-language services and resources. Second, the URLA is the standard loan application form used for virtually all mortgage applications in the US. Including the language preference question on the URLA integrates it into the mortgage lending process, eliminating any discomfort that some lenders may have with asking for information that other lenders do not collect. Third, one of the major benefits of adding the language preference question to the URLA is that the URLA remains in the loan file throughout the mortgage process. The proposed alternative form does not require that language preference information be integrated into the mortgage process or travel with the loan file.
FHFA’s sudden decision to eliminate the language preference question from the URLA is arbitrary and unfounded, is not supported by the extensive record the agency has developed on this issue, and will undermine efforts to ensure that all borrowers are treated fairly by their mortgage lenders and servicers. We urge FHFA to rescind this decision and restore the language preference question to the URLA immediately.