What steps are you taking to reach non-English speaking borrowers?
This is both a business and a compliance question
Boy our industry loves acronyms ... have you heard this one? "LEP" It stands for Limited English Proficiency. This includes people with a different primary language, but also those who have trouble understanding English for other reasons, such as hearing or visual impairments.
How to reach LEP consumers is an interesting question from both a business and compliance standpoint. Let's analyze both.
Business Opportunity
The MBA's data shows that 9% of the US population is LEP. That includes 16 million who speak Spanish (65%) and 1.6 million who speak Chinese (7%).
And here are some interesting statistics from the National Assoc. of Hispanic Real Estate Professionals showing that Hispanics are the largest percentage of new homeowners:
From 2000 to 2014, Hispanics made up 50% of new homeowner households.
In 2014, the number of Hispanic homes grew by 320,000, meaning Hispanics may occupy 7 million of the 17 million new homes that will be built between 2010 and 2025.
By 2020 it is estimated that 50% of all new homeowners will be Hispanic.
What percentage of your assessment/lending area is LEP? Are you losing business here?
So maybe this is a pretty big opportunity? Of course you have to ask - do we need to have bilingual options in order to capture that opportunity?
Compliance Questions
So the law here is in an interesting place - most of this is hypothetical because I don't see a lot of enforcement just yet.
There's one particular Massachusetts rule that I want to discuss in depth, but also some Federal stuff that we feel you should hear about.
#1- Massachusetts LEP Law
So there's this interesting law on the books in Massachusetts. It's something we haven't seen in any enforcement actions or court cases. This isn't something that seems to have garnered a ton of attention.
With that disclaimer - here's what it says:
"It is an unfair and deceptive act or practice for the mortgage broker or lender to fail to take reasonable steps to communicate the material facts of the transactions in a language that is understood by the borrower. Reasonable steps which shall comply with this regulation may include but shall not be limited to: (a) using adult interpreters; and (b) providing the borrower with a translated copy of the disclosure forms required by any applicable state or federal law, regulation or directive, in a language understood by the borrower."
The citation here is 940 CMR 8.05(3).
Woh! That's what I thought when I read that. This has been on the books for almost a decade, but we seem to never hear about it. Now if you read this carefully, it doesn't actually say interpreters and translations are mandatory, it just says these would comply. Call these a safe harbor.
And then I found this Attorney General interpretation:
So that makes us feel a little better, but still I think - "reasonable steps" implies that we're taking some steps. What institution originating loans in Massachusetts is actually taking any steps to help LEP borrowers understand loan terms??? Maybe they're providing some Federal resources (below) to LEP persons? Maybe they've hired bilingual loan originators or loan processors. If an institution admits to taking no steps, does that mean they're technically in violation?
My question is whether interpreters and translations could only increase our compliance risk. ... How much trouble do we have getting bank employees to explain this correctly in English? How many mistakes do we already make when completing disclosures in English? Seems to me that, at best, we're still going to double our chance for mistakes here.
#2- Federal Compliance Issues
There are also some Federal rules I think you should be aware of (but too much to cover completely in one newsletter).
Here are two CFPB enforcement actions related to the LEP issue:
GE Capital Retail Bank (aka Synchrony Bank) - June 2014 action by DOJ and CFPB where customers who indicated that they preferred to communicate in English were not provided certain promotions that were made available to other consumers. (Maybe they didn't have time to translate those promotions to Spanish).
American Express - December 2013 action by CFPB where Spanish- speaking consumers in Puerto Rico received telemarketing calls about an add-on product. American Express didn't have uniform scripts for the sales calls and provided all the documents only in English.
Loan servicing. This is one area to be careful with LEP issues. The CFPB servicing examination manual expressly refers to this and requires examiners to investigate what steps the servicer is taking to help LEP borrowers. See page 30.
Advertising. I would also say this: If you're advertising some financial services in another language, include a statement explaining that other products may be available. The fair lending issue that could arise here is an allegation that you're selectively advertising only certain products in Spanish.
Extra: Additional Resources
The CFPB has both an English-Spanish glossary and an English- Chinese glossary. Both are pretty thorough.
There's even a Federal inter-agency website - LEP.gov - that is dedicated to these issues.
The CFPB has a whole host of LEP best practices in its Fall 2016 Supervisory Report (Section 3.1).
Download the NAHREP's "Glossary of Real Estate Industry Terms" here.
Here is Fannie Mae's webpage with Spanish resources for mortgage lenders.
For experts on this LEP issue, you'll want to read this brief from the Americans for Financial Reform compiling stories of how LEP consumers struggle with financial products.
In Other News
Since Rep. Randy Neugebauer (R., Texas) may be a much more discussed person in mortgage and compliance circles, we're actively looking for a nickname that is easier to pronounce and spell. So far we've received "New Burger," "Noogie," and "Nuggie-Burger." Anybody else?
Apple has been sued by the victim of a driver who caused an accident while using Apple's FaceTime product. The theory? Apple had technology to prevent drivers from using FaceTime while driving, but chose not to implement it.
China hacked the FDIC from 2010 to 2013 and U.S. officials covered it up, according to a Congressional report - CNN Report here. Now we know why they're taking cybersecurity so seriously!
Established in 1472, the oldest bank in the world (and Italy's 3rd largest) is likely going to fail (Forbes article here) and will need a government bailout. With non-performing loans of roughly $50 billion and total assets at approximately $175 billion - it's not hard to see why. What a shame! Other Italian banks are in trouble too - one consumer group estimated that a bank bailout would cost each Italian family$833.
Is your organization spending too much time looking inward, and not enough looking outward? What percentage of your time do you spend thinking about your client's, as opposed to your own issues? Understanding and providing value for your clients is key to business success. Did your organization spend 80% of its time last week with internal issues? I'd rather have staff meetings obsessing about our client's struggles and how someone could help them, rather than devoting that same amount of energy to ironing out things inside our own organization. If we remain "client focused," I would think the internal issues would fade into the background.
"Making mistakes is the privilege of the active. It is always the mediocre people who are negative, who spend their time proving that they were not wrong."
- Ingvar Kamprad (IKEA founder)
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