ABA Bank Compliance - May/June 2019

appropriately. It should also be noted that the lack of translations and language services is a frequent consumer complaint among LEP borrowers, which can draw the Bureau’s attention and could trigger guidance and enforcement actions.

Another common theme is that LEP borrowers were well aware of the seriousness of a mortgage transaction and were willing to learn whatever was necessary, but they either did not have or were not aware that they had access to the resources they needed. In any translation, the federal reports stressed that concepts, rather than precise word-by-word translations, are more important to fully convey the meaning of the documents in a mortgage transaction. Some borrowers report that they appreciate the translation in their native language even though they speak English fluently. If access to translated documents is not available, borrowers are generally willing to work with a lender who speaks in their preferred language. Hiring qualified staff (including third-party vendors) that can communicate with LEP borrowers in their native languages may require a significant upfront financial investment from lenders and servicers, but it may pay off in the long run by preventing defaults and improving the customer service experience.

These reports demonstrate that the CFPB and other federal regulators are interested not only in the concerns of LEP borrowers and the assistance they need, but also the input of industry stakeholders concerning what will be both feasible and effective in the future.

The Potential Game Changer:
The FHFA Preferred Language Question

On October 20, 2017, the FHFA made an expected, but dreaded announcement: it would officially be adding the preferred language question to the redesigned URLA. As a reminder, the URLA is, the standard form used in all first mortgage applications. The redesigned URLA will be optional beginning in July 2019 and will be required in February 2020. The form will ask applicants which of the following is their preferred language: English, Chinese, Korean, Spanish, Tagalog, Vietnamese, or “Other.” The Bureau was quick to endorse the inclusion of the preferred language question.

When the question was first suggested in 2016, industry pushback persuaded the FHFA to postpone any changes for a year in order to look more closely at the issue. While certain stakeholders are in favor of the question, as a way to establish a more consistent approach across the industry to foreign language documentation, the overriding reaction is one of concern about operating costs and the legal implications involved with collecting the information as well as understanding the long-term implications for servicing the loan. The industry continued to push back and ask the FHFA to remove, or at least modify, the question in light of those concerns. The FHFA took much of the commentary into consideration and made certain modifications in the final version but did not remove the question entirely.

This added question now documents the borrower’s language
preference at the beginning of the life of the loan. Once captured,
the lender has an obligation to share this information should the
loan be transferred to a new servicer. Further complicating matters
is the lack of clarity around what requirements will be imposed
to communicate with the borrower in their preferred language
throughout the lifecycle of the loan. In addition, the question in-
cludes a caveat that the loan transaction will likely be completed
in English and that language resources may not be available.
Banks are particularly concerned about the expectations this
creates on the part of the borrower when the they may not be
currently capable of providing those translations and services.
Another potential consequence is that borrowers may worry that
answering this question honestly may result in discrimination,
negating the purpose of having the question in the first place.

If, as the industry fears, this question will result in new liability for lenders and servicers, it could require a major operational overhaul for many companies. In order to ensure compliance, they will likely need to update various workflow processes, add interpreter staff or vendors, and make changes to their loan servicing platforms. If this question now establishes that the lender or servicer officially “knows” or “is aware” that the borrower communicates in a different language, this could also trigger the state-level requirements to submit other documents in that language (like the Pennsylvania Act 91 Notice and the New York 90-Day Pre-Foreclosure Notice).

Recommendations

As the industry waits to see what the compliance and legal ramifications of the preferred language question will be, examining state-level trends and federal reports can guide and inform the compliance policies of financial institutions.

Multilingual education and translated documents are crucial, especially given the complexity of the mortgage loan process and the lack of financial literacy among the general borrower population, not just with LEP consumers. Research commissioned by Fannie Mae and Freddie Mac found that LEP borrowers generally want to understand the mortgage loan process, and that most study participants said that having basic mortgage concepts, terminology, and loan documents translated into their preferred language would be helpful ( www.fhfa.gov/PolicyProgramsResearch/Policy/ Documents/Borrower-Language-Access-Final-Report-June-2017. pdf). Many are interested in using lender and community group services and counseling, but they need to be made aware of available resources. In addition to referrals from friends and family members in their communities, many LEP borrowers are comfortable searching for information on the Internet. Therefore, if a lender’s language services are prominently displayed online, this could have the benefit of generating more business.

Some states provide the required translated documents and any requirements surrounding usage. Others place the burden on lenders and servicers to provide those translated documents and accompanying services.