Exclusive: Senate Democrats ask FHFA to reverse changes to new uniform home loan application
A group of nearly 20 senior Senate Democrats, including five current presidential candidates, want the Federal Housing Finance Agency to reverse a recently proposed set of changes to the new Uniform Home Loan Application, saying the changes could reduce access to credit for mortgage borrowers who are already underserved.
Back in August, the FHFA led Fannie mae and Freddie mac to make changes to the new URLA form and delayed the mandatory use of this form from February 1, 2020 to an unspecified future date.
The implementation of the new form would have led to the development of more than three years from the form to an end after more than 20 years of government sponsored businesses using the same form.
But with the deadline looming at the start of 2020, the FHFA announced earlier this year that it would delay the implementation deadline and ordered GSEs to remove the language preference issue and information on counseling in the future. housing matters from the updated URLA form.
As part of the change, the question on language preference and the question on home ownership education and housing advice were to be moved to a separate voluntary form.
But a group of Senate Democrats, led by Senators Catherine Cortez Masto, D-Nev., And Bob Menendez, DN.J., want the FHFA to reverse these changes.
In a letter sent to FHFA Director Mark Calabria, 19 Senate Democrats ask the FHFA to keep the language preference issue and housing advice information on the main URLA form, as c ‘was the case when the URL originally redesigned in 2016.
Senators Sherrod Brown, D-Ohio, join Cortez Masto and Menendez in sending the letter; 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, DN.Y. ; Kamala Harris, D-Calif .; Bernie Sanders, I-Vt .; Ben Cardin, D-Md .; Tina Smith, D-Minn .; Cory Booker, DN.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, senators believe the decision to move these sections to a separate form “could reduce access to mortgage financing for homebuyers ready for English-fluent mortgages and have serious financial repercussions. “.
The changes, in particular the deletion of the question on language preference, were supported by the Mortgage Bankers Association and other groups.
“As you will recall, MBA objected to including the language preference issue in the URL because of the customer relationship issues that this issue would cause if lenders could not actually serve borrowers in the URL. language of their choice, and due to unresolved operational and legal issues raised by the information on language preferences, ”said MBA President and CEO Bob Broeksmit in a letter to MBA members earlier this year.
In their letter, the senators note that the mortgage industry’s concern over the issue of language may be overstated.
“In November 2017, the FHFA decided to place the question on language preference and information from housing counseling agencies on the redesigned and revised URL. The FHFA decision is the result of a multi-year effort to better fulfill the FHFA’s statutory mandate of providing access to credit in various markets and supporting home ownership opportunities for loan-to-loan borrowers. take out a mortgage, ”write the senators.
“As you know, the revised URL has been carefully crafted as part of a thoughtful multi-year process by FHFA staff, Fannie Mae and Freddie Mac to include the issue of language preference and information on the agencies. housing advice, “they continue.
“Although some members of the mortgage industry have expressed concern over the issue of language preference due to perceived legal liability and uncertainty, the FHFA and the Consumer Financial Protection Bureau has taken the necessary legal steps to clarify that identifying borrowers’ language preferences is a vital data collection for the industry and does not create a new risk of an Equal Credit Opportunity Act or other fair loan violations, ”they add.
Beyond that, senators argue that the revised language preferences section of the URL “made it clear to borrowers that choosing a preference other than English would not guarantee service in that language.”
This is why, in the opinion of the senators, it was “surprising” to see the FHFA decide “arbitrarily” to make the modifications to the form.
“Voluntary forms are not adequate disclosures,” write the senators. “Lenders won’t be required to use the new voluntary form, and it’s unclear how many will choose to do so. This will result in disparate treatment among borrowers who use different lenders. “
In addition, senators believe that removing the language preference issue will have a negative impact on the borrower and the mortgage manager after the loan closes.
“In addition, there is no guarantee that the voluntary form will remain with the loan file. This leaves subsequent loan officers without basic communication information about their borrowers, ”write the senators.
“We know that many English-proficient borrowers encountered language barriers when trying to get help from their agents during the financial crisis. In some cases, such barriers prevented borrowers from taking advantage of loan modifications to which the borrower was eligible, ”the senators continue. “The voluntary form will also undermine all efforts to collect market-wide data on language access needs. Without this vital information, policymakers and lenders will once again wonder how well the market actually serves various borrowers. “
Senators also want housing counseling information to be restored to the main URLA form, to ensure that “ready-to-borrow borrowers are provided with resources on housing counseling groups that speak their language to ensure borrowers understand their loans ”.
Senators closed their letter by stating that borrowers and the housing sector would be helped by returning GSEs to the initially proposed URLA form.
“The revised URL was an important step towards increasing access to languages across the mortgage market. Access to sustainable and affordable homeownership is essential for underserved borrowers with poor English skills, ”write the senators.
“Ultimately, it is in the business interests of all who work in the mortgage market to be prepared to serve all borrowers willing to afford a mortgage,” they conclude. “We urge you to reverse your decision to remove the language preference issue and housing advice access information from the redesigned URLA and work to leverage the FHFA’s efforts to improve accessibility to housing. mortgage loan products for various borrowers in the mortgage market. “
The senators’ letter is seconded by the UnidosUS, NAACP, National Housing Resource Center, Leaders’ Conference on Civil and Human Rights, National Alliance for Fair Housing, Center for Responsible Lending, Americans for Financial Reform, National Coalition for the Development of the Asian-Pacific American Community, and the National Center for Consumer Law (on behalf of its low income clients).
To read the senators’ letter in its entirety, Click here.