Federal Housing Finance Agency Director Mel Watt today defended his agency’s decision to include a language preference question on its updated Uniform Residential Loan Application, and said that the CFPB intends to provide a safe harbor under the Equal Credit Opportunity Act. The new form will go into effect beginning in July 2019 and will be mandatory for loans eligible for purchase by Fannie Mae and Freddie Mac beginning in February 2020.
While he acknowledged the concerns raised by many in the industry about the legal risk that including such a question would pose for lenders, Watt said that FHFA worded the question to emphasize to borrowers that their loan transaction would likely be conducted in English, and that indicating a preferred language does not create an expectation that the lender will proceed with the transaction in the borrower’s language of choice.
Watt added that “because this is the first time that the URLA has undergone a significant update in 20 years and it is unlikely to be updated again anytime soon, we concluded that this was the right time to start having borrowers make this important information available to lenders.”
Watt also announced that the FHFA is currently in the process of developing a request for input on whether and how Fannie Mae and Freddie Mac should use alternative data for credit scoring purposes, adding that the agency will make a decision on the GSEs’ future credit score model requirements next year, with implementation expected in the latter half of 2019.