Mortgage News - FHA Implements Language Preference Requirement For Lenders

FHA Implements Language Preference Requirement For Lenders

Mortgage News July 11, 2023

In a move aimed at enhancing accessibility and inclusivity, the Federal Housing Administration (FHA) has mandated that lenders offering FHA loans must now inquire about the language preference of mortgage applicants.

Effective from August 28, 2023, lenders will be obligated to utilize the Fannie Mae/Freddie Mac Supplementary Consumer Information Form (SCIF) for loan applications. The SCIF is a well-recognized industry form that facilitates borrowers in specifying their language preferences and indicating any homeownership counseling or education they have received.

The form provides borrowers with the option to share all, some, or none of the requested data. This information will enable lenders to provide mortgage-related information in languages that borrowers can comprehend. This requirement signifies another step in the recent efforts by the FHA to better assist borrowers with limited English proficiency (LEP). Additionally, the FHA recently introduced a language access webpage, which translates key FHA documents into the five most commonly spoken languages among LEP households: Chinese, Korean, Spanish, Tagalog, and Vietnamese.

The FHA’s decision follows the Federal Housing Finance Agency’s requirement for lenders who sell loans to Fannie Mae and Freddie Mac to collect language preference data, which was enacted in March and proposed as regulation in April.

Nicole Cabañez, a Skadden Fellow at the National Consumer Law Center, emphasized the significance of identifying language preference as the first step toward serving borrowers with limited English proficiency. While acknowledging the effectiveness of the SCIF, Cabañez urged lenders and servicers to be obligated, rather than merely encouraged, to take concrete measures to address the needs of LEP consumers, including increasing access to written and oral assistance. The hope is that the FHA will continue its efforts to reduce barriers and foster greater opportunities for LEP homeowners in the mortgage market.

The FHA’s decision to require lenders to gather language preference data is a crucial step toward promoting inclusivity and ensuring that mortgage information is accessible to borrowers from diverse linguistic backgrounds. By providing borrowers with the option to express their language needs and expanding language access resources, the FHA aims to create a more equitable and inclusive housing market.

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FHA Implements Language Preference Requirement For Lenders

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