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8 Pitfalls to the FHFA’s URLA Changes

writing-on-paperSeveral trade groups and organizations focused on the banking and mortgage industries recently wrote a letter to  Federal Housing Finance Agency (FHFA) Director Mel Watt, concerning a potential last-minute addition to the new Uniform Residential Loan Application (URLA).

The groups, including the American Bankers Association, Consumer Bankers Association, Consumer Mortgage Coalition, Credit Union National Association, Housing Policy Council, Independent Community Bankers of America, Mortgage Bankers Association, and National Association of Federal Credit Unions, noted their concerns over a particular part of the application that asks borrowers to indicate their language preference. The groups pointed out that the inclusion of the question raises serious compliance and legal concerns.

The new changes to the URLA form are expected to go into effect later this month.

"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 said.

According to the banking groups, a question on language preference on the URLA would come with eight consequences:

  1. Require lenders to ask borrowers sensitive questions before the interactions and implications of other rules are understood and addressed.
  2. Create expectations among consumers that can't be met.
  3. Provide an inferior means of obtaining and analyzing data.
  4. Detract from other more promising avenues.
  5. Potentially expose lenders to liability.
  6. Open both lenders and borrowers to considerable origination costs.
  7. Open servicers to new obligations and increase borrowers’ servicing costs.
  8. Require translation services without accompanying government or GSE materials.

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

Click here to view a copy of the letter.

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