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Don’t Wait for Regulations

This piece originally appeared in the January 2023 edition of DS News magazine, online now.

The United States is becoming increasingly multilingual. The U.S. Census Bureau estimates that in 2019, more than 67 million people spoke a language other than English at home, a 52% increase from 2000. Non-native speakers are also making up an increasingly significant proportion of homebuyers. According to the National Association of Hispanic Real Estate Professionals (NAHREP), in 2021 the Hispanic homeownership rate increased (for the seventh consecutive year) to 48.4%. NAHREP expects 70% of new homes sold between 2020-2040 to be purchased by Latino families.

To accommodate borrowers with Limited English Proficiency (LEP), mortgage servicers must build in processes to ensure fair and equal customer service throughout the life of the loan. Additionally, regulatory and legal pressure is building to ensure that LEP borrowers have equal access to customer support and default servicing options.

Servicers should be familiar with the state laws, Consumer Financial Protection Bureau (CFPB) guidelines, and any new federal legislation related to language access for LEP borrowers.

As mortgage servicers prepare for 2023, they must evaluate and improve their resources to better assist LEP borrowers.

The Legal Framework for LEP Servicing
Federal lawmakers have not passed any laws that specifically mandate the provision of non-English-language services to LEP borrowers during the mortgage servicing process. However, Congress has begun working on a bill that would establish language translation requirements for mortgage applications and servicing.

While no action had been taken on the bill as of December 2022, the CFPB encourages servicers to provide greater language access for LEP borrowers. The Bureau made its position clear with its “Statement Regarding the Provision of Financial Products and Services to Consumers with Limited English Proficiency.”

In its statement, the CFPB said, “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 CFPB and courts have been more active in enforcing fairness and equality for LEP consumers.

The State Mortgage Regulators of 48 states entered into a settlement with PHH Mortgage Corporation regarding allegations of deficiencies in servicing, foreclosure, loan modification, and other loss mitigation processes. Under the settlement, PHH was required to develop/implement policies and procedures related to borrowers with LEP, to provide translation services, and, when evaluating borrowers for loss mitigation options, to accept hardship letters and state and federal government forms in non-English languages.

Evaluate Current Servicing Options and Resources for LEP Consumers
To improve support for LEP borrowers, mortgage servicers should start by reviewing The Equal Credit Opportunity Act (ECOA) Baseline Review Module 4: Fair Lending Risks Related to Mortgage Servicing.

The Servicing Options for Consumers with Limited English Proficiency (LEP) section includes these (and other) key questions:

  • Does the entity offer servicing options for borrowers with limited English proficiency (LEP)? Are such options offered through live customer service? Through translated documents? Please note the languages offered and servicing options provided.
  • Does the entity capture and track borrowers’ indicated preferences to receive services in languages other than English? If so, please describe.

If customer service personnel are available to provide assistance in languages other than English, are they dedicated customer service personnel (as opposed to personnel who have other roles but are available to translate on an as-needed basis)? “No” answers indicate room for improvement.

Take Advantage of Existing Language Resources
Fortunately, servicers do not have to create their own documents and educational material. There are many language resources for mortgage servicers and borrowers available through the Mortgage Translations clearinghouse and the Consumer Financial Protection Bureau website.

Understanding the complicated mortgage process is challenging for many borrowers—even without a language barrier. LEP borrowers must be able to understand escrow (a concept that doesn’t translate well) and, if relevant, forbearance repayment options and how to avoid foreclosure.

Servicers should provide interpretation services and translated documents to help LEP borrowers navigate these processes.

LEP borrowers appreciate being able to speak with knowledgeable people who can explain the complicated mortgage process in their native tongue. The government expects mortgage professionals to help LEP borrowers successfully navigate the complicated mortgage process.

Fortunately, 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. 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 or an interpreter.

Servicers should not wait for the CFPB or Congress to mandate support for LEP consumers. Servicers should evaluate their LEP servicing practices and language access resources and improve them if needed. Doing so will help them comply with CFPB guidelines and future laws, improve customer service, and build a strong customer base of diverse borrowers.

About Author: Matthew Perez

Matthew Perez is VP of Mortgage Servicer Product Development for FICS (Financial Industry Computer Systems, Inc.), a mortgage software company specializing in mortgage origination, residential mortgage servicing, and commercial mortgage servicing software for mortgage lenders, housing agencies, banks, and credit unions.
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