The saga over whether to include a controversial "preferred language" question on the new redesigned Uniform Residential Loan Application (URLA) continues. Last week, the Federal Housing Finance Agency (FHFA) changed course yet again and decided to remove the language preference question from the redesigned URLA. Instead, the question will be moved to a separate, optional consumer information form that will not be part of the URLA.
The preferred language question would ask all mortgage applicants (using the GSEs' form) to indicate their language preference when completing the application. The history of this controversial question dates back several years. We previously commented on developments related to the preferred language question in July 2017 and October 2017. In August 2016, the FHFA decided not to move forward with a plan to include a language preference question in the redesigned URLA due, in part, to strong industry opposition. A year later, after requesting public comments on the preferred language question through a formal RFI process, the FHFA announced in October 2017 that it would include a modified version of the proposed preferred language question in the revised URLA. In an attempt to allay industry concerns about the operational and legal consequences of collecting information on applicants' language preferences, the final version of the question included additional disclaimer language advising applicants that the loan transaction is likely to be conducted in English and that communications in the applicants' preferred language may not be available. Mandatory use of the redesigned URLA was originally set for February 2020.
Under new leadership, the FHFA has changed course again and decided to move the preferred language question from the URLA to a separate, optional form. Although this change helps mitigate some of the risks associated with including a question on language preference on the mortgage application itself, it does not alleviate such risks completely. For example, it is still unclear what – if anything – a lender is required to do with the language-preference information it collects. And there continues to be a risk that applicants themselves will be confused or misled by the preferred language question, especially applicants with limited English proficiency. Moreover, the FHFA cannot control how other government agencies, private plaintiffs, or consumer groups may seek to use the language-preference information collected.
The deadline for mandatory use of the redesigned URLA will no longer be February 1, 2020. The new deadline for implementation has not yet been announced.
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