This piece originally appeared in the November 2021 edition of DS News, available here.
Mortgage industry regulators have made it clear that lenders and servicers must treat mortgage borrowers fairly and provide equal access to financial services regardless of the consumer’s ability to speak English proficiently. As such, they are expected to provide resources to help borrowers with limited English proficiency navigate the complicated mortgage process. The government has made it clear to mortgage lenders that all Americans deserve equal access to credit. They have even taken some enforcement actions against lenders who have violated its fair lending mandates. Now, with eviction and foreclosure moratoria ending and borrowers coming out of COVID-19 forbearance, mortgage servicers must be prepared to meet the needs of borrowers with limited English proficiency (LEP).
The Regulator’s Perspective
In January 2021, the Consumer Financial Protection Bureau (CFPB) issued its “Statement Regarding the Provision of Financial Products and Services to Consumers with Limited English Proficiency.” The Bureau’s position is clear: “The Bureau encourages financial institutions to better serve LEP consumers while ensuring compliance with relevant Federal, State, and other legal requirements,” including fair lending laws. The statement outlines compliance principles and guidelines that encourage financial institutions to expand access to products and services for LEP consumers. The CFPB has stated that providing services to LEP consumers is part and parcel of full compliance with “the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), the Equal Credit Opportunity Act (ECOA), and other applicable laws.”
Mortgage servicers are expected to improve their practices with respect to LEP borrowers. The Equal Credit Opportunity Act Baseline Review Modules include module iv: Risks Related to Mortgage Servicing. Examiners are asked to describe the institution’s policies and procedures for servicing loans held by LEP borrowers, including the following information:
- Does the institution flag files that require non-English language assistance? If so, how is this flagged?
- Do calls for customer service have an option for languages other than English? If so, how are those calls processed?
- Does the institution have customer service personnel available to provide assistance in languages other than English?
A settlement between a large nationwide mortgage servicer and 48 state attorneys general regarding improper servicing allegations required the servicer to improve its practices regarding LEP borrowers. The servicer was required to provide translation services and accept hardship letters and state and federal government forms in languages other than English.
Although some states have laws regarding servicing for LEP borrowers, there is currently no federal law that specifically mandates the provision of non-English language services to LEP borrowers during the mortgage servicing process. However, that may soon change. In May 2021, Texas representative Sylvia Garcia introduced a new bill in the House of Representatives. H.R. 3009—the Improving Language Access in Mortgage Servicing Act— establishes language translation requirements related to residential mortgage applications and servicing. The bill includes these provisions:
- The Consumer Financial Protection Bureau (CFPB) must create a standard language preference form. Creditors and servicers must provide this form to consumers along with residential mortgage applications and certain notices related to a mortgage loan.
- Upon notice of a consumer’s language preference, creditors and servicers must provide (1) oral interpretation services; and (2) translated documents, if available.
- The CFPB and the Federal Housing Finance Agency must publish translated documents used in association with a residential mortgage.
If passed, the law will have a significant impact on originators’ and servicers’ operations. Proposed on May 7, it was already reported out of committee for consideration by the House, but no action has been taken as of September 2021.
Whether it’s this bill or the next, a federal mandate to improve language access for LEP borrowers is on the horizon. Both the Biden administration and Congress are focused on efforts to provide additional resources and protections to LEP borrowers. If they aren’t already doing so, servicers should start providing language resources and assistance to LEP borrowers now.
Best Practices for Servicers
To provide better customer service to LEP borrowers and comply with regulations and guidelines, mortgage servicers should:
- Know the Rules. Keeping up with new regulatory requirements is particularly important during times of rapid change. Servicers should be familiar with the state laws, CFPB guidelines and/or any new federal legislation related to language access for LEP borrowers. Call center representatives should be trained how to respond to callers who need assistance in another language.
- Be Familiar with Available Resources. There are many language resources already available to help mortgage servicers and their borrowers, and more will likely be coming. As forbearance ends, servicers must provide information about repayment options and preventing foreclosure in borrowers’ preferred language.
- Share Language Resources with LEP Borrowers. Understanding the complicated mortgage process is challenging for many borrowers—even without a language barrier. On the servicing side, LEP borrowers must be able to understand escrow (a concept that doesn’t translate well), forbearance repayment options, and how to avoid foreclosure, among other servicing topics. Servicers can provide interpretation services and translated documents to help LEP borrowers navigate these processes.
While developing the Language Access Multi-Year Plan, Fannie Mae and Freddie Mac conducted interviews and focus groups with borrowers whose primary language wasn’t English, as well as with lenders and servicers, to learn how borrowers and mortgage professionals interact throughout the mortgage process. Not surprisingly, LEP borrowers want to use documents written in their own language. While they appreciate translated documents, LEP borrowers prefer interpretation (in-person translation). They want to speak with knowledgeable people who can explain (and be sure they understand) the complicated mortgage process and answer their questions.
Mortgage Translations Clearinghouse. This FHFA website includes many language resources available through the CFPB, Fannie Mae, and Freddie Mac:
- Borrower Education Materials: Avoiding foreclosure, hurricane relief, and disaster recovery.
- Glossaries of Financial Terms: Standardized glossaries are available in five languages: Spanish, traditional Chinese, Vietnamese, Korean, and Tagalog.
- COVID-19-related resources: Forbearance and repayment options information and a forbearance servicer script in multiple languages.
- Interpretive Services: Live interpretation services and counseling in more than 200 languages to help LEP borrowers understand the mortgage process, navigate forbearance, and prevent foreclosure CFPB. The CFPB website provides mortgage information for consumers in eight languages.
- Fannie Mae: Fannie Mae’s website provides translations for important mortgage documents, including the mortgage statement, escrow documents, delinquency/workout notices, and a mortgage assistance application. It also provides a helpful forbearance script.
- Freddie Mac: Freddie Mac provides information about COVID-19 relief for homeowners in Spanish and several other languages.
- Housing and Urban Development: The HUD website includes resources (e.g., housing counseling and COVID-19 outreach) related to Fair Housing for LEP individuals.
Mortgage Servicing Software Can Help
Mortgage servicing software can and should play a role in assisting LEP borrowers. Servicers should use mortgage servicing software that, at a minimum, allows them to indicate borrowers’ preferred language throughout their software systems. This helps servicers direct borrowers to the right staff who can quickly and easily assist them. The language preference indicator can also alert customer support or collections staff that a borrower may need translated documents and/or an interpreter.
America’s diversity increases every year, and mortgage lenders and servicers have a responsibility to serve all people in their service areas with a high level of support and fairness. By taking steps now to consider how to best serve LEP borrowers, lenders and servicers can expand their potential customer base while ensuring compliance with new regulations intended to keep the doors of homeownership open to all.