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As I mentioned in a previous post, FHFA is still considering adding a question to the new Uniform Residential Loan Application (URLA).
The question would ask the applicant to indicate their ‘preferred language.’ The industry fears that this may open up a whole new regulatory can of worms.
FHFA believes knowing this information will aid the lender and, ultimately, the loan servicer in better communication with the borrower. Lenders fear it may place certain obligations or restrictions on them during the loan process and while servicing the loan.
FHFA says it’s just for informational purposes, no more. The industry says why ask the question if you’re not going to do anything with the answer?
The fear in the industry is what might result as regulations and requirements once the information is obtainable.
Think about it…
- Could laws be promulgated requiring a lender to provide all loan documentation and communications in the borrowers preferred language?
- Would a lender be required to provide a disclosure, in multiple languages, that advises the consumer they cannot communicate in all preferred languages?
- When servicing a loan will all default communications and loss mitigation be required in a borrower’s preferred language?
- Could a consumer raise a defense as a QM/ATR challenge, or in the event of default, or other loan related problems, based on a lack of understanding, saying that the lender knew but did not communicate in their preferred language?
You can see that the risks of obtaining this information may far outweigh the potential benefits.
Some lenders may choose to serve certain consumer groups and, in doing so, provide communication in that group’s preferred language.
However, it is unreasonable to believe, or require, that all lenders have the capabilities to communicate with all borrowers in every language they may prefer. Just think of the myriad of loan documents that would need to be available in every language.
Maybe the answer once again lies in technology. I’ve read about a new device that fits in your ear and will translate languages real time, as you listen. Really!
Pilot is marketed as the first smart earpiece capable of translating between two languages. It doesn’t yet do them all but will handle English, French, Spanish, and Italian by fall of this year. Presently, it is limited to translations between 2 people, both wearing the earpiece.
If you’re interested, here is more info about PILOT. (As a disclaimer: Pilot is no way affiliated with me or LoanLogics.) I just thought it sounded kind of neat.
Hey, maybe FHFA might have something with this ‘preferred language’ thing. What do you think?
