that the translation should always be provided in addition to
the English version. This requirement can be costly for financial
institutions, given that it requires translations to be provided regardless of the borrower’s preferred language. This can also add
several pages to documents and increase the associated printing
and postage costs. A good example of this type of requirement is
Rhode Island’s Notice of Mediation. Rhode Island requires notice
and certificates related to foreclosure mediation to be sent to all
borrowers in English and Spanish, and, because the state has a
significant Portuguese-speaking population, documents need to
be sent in that language as well.
State regulators may also make additional translations of required documents available, with the specific language options
usually determined by the state’s population demographics. Lenders
and servicers are then either encouraged or required to provide
that translation to the borrower when they are aware the borrower
communicates in that language. This is true for the Pennsylvania
Act 91 Notice3 and the New York 90-Day Pre-Foreclosure Notice. 4
Ideally, these policies are less costly for the entity sending the
notices, because they are not sending unnecessary additional
translations to every borrower. However, the lack of definition
surrounding when a lender or servicer is “aware” or “knows” of
a borrower’s preferred language creates uncertainty and makes
compliance more difficult.
Contract Negotiation—
The Lender’s or Servicer’s Burden
Some states impose their foreign language communication policies
on how the initial contract or loan was made and then impose
subsequent document requirements based on the language in
which the contract was primarily negotiated. For example, California’s Translation Act requires that if a contract was primarily
negotiated in Spanish, Chinese, Tagalog, Vietnamese, or Korean,
the customer must receive a written translation of every term
and condition in the contract. The California Court of Appeals
later applied this to auto deficiency and repossession notices. 5
The recently enacted California Senate Bill 1201 applies the Act
specifically to mortgage loan modifications. Thus, if a lender cannot support translated documents, they also should not market
or discuss loan terms in the foreign language.
Home equity lending in Texas is another good example. The
Texas constitution specifies that a written notice must be provided to all borrowers before a home equity loan can close. The
constitution further requires that if discussions with the borrower
are conducted primarily in a language other than English, the
lender must provide an additional copy of the notice translated
into the language in which the discussions were conducted (Tex.
Const. Art. XVI, § 50).
The importance of complying with foreign language requirements can be seen in recent language discrimination lawsuits against
lenders in states with translation requirements. In February 2018, the
City of Sacramento recently sued a large bank for alleged discriminatory lending patterns, including its failure to provide mandatory
disclosures in Spanish to Spanish-speaking loan applicants. In July
2018, the New York Attorney General announced a settlement with
an auto dealer accused of deceptive lending practices targeting
non-English speaking borrowers. The dealer allegedly negotiated
with customers in Mandarin and Cantonese, but provided final
agreements in English that contained different terms.
These requirements often apply not only to loan origination,
but also to subsequent agreements or transactions with a borrower. For this reason, servicers that receive transferred purchase
or refinance loans should review records to determine in which
language the loan was originated to ensure they are complying
with any subsequent document requirements.
Federal Level Trends:
A Wave of Reports and Plans
Federal regulators have generally been less focused on foreign language requirements than certain states. This may be due, in part,
to changing administrations and priorities as well as the difficulty
of imposing universal language requirements for such a diverse
population. Government-sponsored entities (GSEs) and the Bureau
have long provided guidance in the past in working with LEP borrowers, 6 but the last two years have seen a major jump in activity.
Guidance issued by the Department of Housing Urban Development’s (HUD) Office of General Counsel in late 2016 states that
both intentional and unintentional discrimination of LEP borrowers
could represent discrimination based on national origin, which is
prohibited by the Fair Housing Act (FHA). In addition, at the end
of 2016, the FHFA issued a scorecard for Fannie Mae and Freddie
Mac, including expectations for how it would assess GSE actions
to address LEP consumer issues in the future. A few months later,
the GSEs released a final report on borrower language access,
compiled from interviews with both LEP borrowers and industry
participants. In May of 2017, the FHFA issued a request for input
(RFI) to the industry, asking how to improve language access in
mortgage lending and servicing. (It should be noted that this was
before former Director Richard Cordray’s departure from CFPB.
The use of the information gained from this RFI and what will be
done with it are much more in doubt now than in May of 2017.)
In November 2017, the CFPB published a Spotlight article on
serving LEP customers as well as its final Language Access Plan.
And most recently, in May 2018, the FHFA released a Plan for
Increased Access to Credit for LEP Borrowers, proposing concrete
milestone solutions for the obstacles faced by LEP borrowers.
Common Themes
There are consistent threads throughout these reports that may
provide a road map for what federal regulators will be focusing on in the future. All reports that included borrower input
found that LEP borrowers feel vulnerable while going through
the mortgage loan process, which can make them less likely to
purchase a home or leave them more susceptible to predatory
lending practices. Many LEP borrowers who have gone through
the mortgage process said they could not (and would not) have
bought a home without language assistance. In some cases, the
assistance came from a lender or an advocacy group, in others
from friends and family members—often including their children.
This begs the question of whether these non-professionals are
providing the most accurate translation or are able to translate
appropriately the complex concepts involved in a mortgage loan
