Get ready to become familiar with a newly designed loan application.
In November 2017, the Consumer Financial Protection Bureau (CFPB) confirmed changes to the Uniform Residential Loan Application (URLA) proposed by the Federal Housing Finance Agency (FHFA). The FHFA finalized changes the following month.
The redesigned form will be available to use starting July 1, 2019. By February 2020, the form will be required for all new mortgage applications.
Editor’s note — The current version of the URLA will be used until the new form’s official rollout in 2019. [See RPI form 202]
A wide breadth of agencies requires the URLA for homebuyers applying for mortgages on single family residences (SFRs), making it a central part of the real estate industry. The form is authored by the FHFA — Fannie Mae and Freddie Mac’s regulator — and is required by:
- Fannie Mae;
- Freddie Mac;
- the Federal Housing Administration (FHA);
- the Veterans Administration (VA); and
- the U.S. Department of Agriculture (USDA)’s Rural Housing Service.
In addition to already confirmed changes, the form will include a preferred language question, allowing borrowers to indicate whether they prefer to communicate in a language other than English.
Although borrowers have the option to select a language other than English, the form discloses the mortgage transaction will likely be conducted in English, and that resources may not be available in the language of the borrower’s choosing.
The effect of the addition is simple enough. While the goal is certainly inclusiveness, it is not just for its own sake. The FHFA sees the measure as a step toward increasing access to the mortgage market.
In a press release, FHFA director Melvin L. Watt explains, “Adding a preferred language question to the URLA will enable mortgage industry participants to connect [limited English proficient] borrowers to available language access resources. This will support access to credit for a growing segment of the nation’s housing finance market.”
Discriminatory practices in mortgage lending
While the Equal Credit Opportunity Act (ECOA) prohibits inquiries about an applicant’s race or national origin, the CFPB determined the preferred language question is not a violation of the Act, as it is in the applicants’ best interest to conduct their business in their native tongue, so as to better understand the information presented to them.
This question may in fact prove to be another factor instrumental in helping the CFPB spot discriminatory and predatory lending patterns such as those for which Countrywide settled in 2012.
Although the CFPB is on the lookout, the most effective way to curb discriminatory practices is with boots on the ground. Agents and brokers need to look out for predatory lending — the practice of targeting vulnerable borrowers with mortgages based on adjustable interest rates — by making sure their clients understand all aspects of the mortgage process.
If a client’s mortgage application is denied, work with them to find out why. It’s possible this is simply due to a high debt-to-income (DTI) ratio, but there could be a number of reasons for the denial of an application.
If you or your client believes they may be the victim of discriminatory practices, they can report it to the CFPB.