ABA Bank Compliance - May/June 2019

Financial institutions should consider creating a centralized resource for language services and developing a consistent internal policy related to non-English speaking borrowers. This may require contracting with vendors that provide foreign language services for languages other than Spanish. As part of the Language Access Multi-Year Plan, FHFA, Fannie Mae, and Freddie Mac recently launched an online resource called “Mortgage Translations” ( www.fhfa.gov/Media/PublicAffairs/ Pages/Mortgage-Translations-Clearinghouse-Launched-to-Help-Borrowers-with-English-Language-Barriers.aspx). The Mortgage Translations website provides certain mortgage documents and educational materials in English and Spanish and will add support for Chinese, Vietnamese, Korean, and Tagalog in the future.

Financial institutions should also keep detailed documentation of contact and communication efforts, particularly when English is not the borrower’s primary language or when the borrower asks to communicate in another language. Thorough recordkeeping can be an effective defense against litigation or regulatory enforcement. Servicers should review and update their loan transfer requirements to ensure that they receive information on known language preferences from a previous servicer.

Final Thoughts

So far, enforcement actions for violations of state language requirements have been rare. Even in situations where the state is imposing a requirement, state regulators have acknowledged the difficulty of perfect compliance and have generally acknowledged the good-faith efforts of financial institutions.

At the federal level, enforcement actions can take different forms. For example, actions can be brought for LEP discrimination as ECOA or FHA violations, such as when LEP borrowers are excluded from certain offers; or when LEP borrowers are subject to discriminatory terms and conditions. UDAAP violations are also possible if a bank leads a customer to believe that it will provide documents in a foreign language and then does not follow through or misrepresents the terms of the loan. 7 This is particularly true when products are marketed in a customer’s primary language, but the customer is then required to sign documents in English.

Failure to provide translations and LEP services could increas-
ingly result in enforcement actions, fines, and potential class-action
lawsuits. This should be an area of greater concern in light of the
new preferred language question on the redesigned URLA, as it
will document a borrower’s preferred language at the beginning
of the loan lifecycle. In states where lenders and servicers must
provide translations when they know or are aware that the bor-
rower communicates in a language other than English, a borrower’s
response to this question could potentially be used as evidence of
that knowledge or awareness. Even if the GSEs do not make ad-
ditional requirements based on this question, other governmental
entities and the courts may take a different view. ■

ABOUT THE AUTHOR

MARIA MOSKVER, J.D., is Chief Legal and Compliance Officer for Cloudvirga, a company which provides point-of-sale engines that automate back office operations and increase business insight in the trillion dollar home loan market.

Maria has more than 20 years of experience in the consumer financial services industry, both as a practicing attorney and chief compliance officer, and she most recently served as General Counsel and Enterprise Compliance Officer for Covius. Maria has also served as co-chair of the ALFN Collections Group; the State Government Affairs Committee of AFSA; the Legal Issues Committee of the CMBA, the Publications Committee of the USFN; and the State Legislative and Regulatory Committee of the MBA.

In 2018, she was named one of Housing Wire Magazine’s Women of Influence. Moskver graduated magna cum laude from Colorado College with a degree in Economics and holds an MBA from the University of Denver Daniels College of Business. She received her Juris Doctor from the University of Denver Sturm College of Law.

Endnotes

1 https://www.fhfa.gov/PolicyProgramsResearch/Policy/Documents/LEP-Multi-Year-Plan.pdf

2 LEP borrowers are those who have a limited ability or no ability to read, speak, write, or understand English. Preferred language (“PL”) borrowers are those who are able to read, speak, write, and understand English, but who prefer to communicate in a language other than English. For the purposes of this piece, we are referring only to LEP borrowers, but the policies for LEP borrowers are generally acknowledged to benefit PL borrowers as well.

3 The Pennsylvania Act 91 Notice is required to be provided in English and Spanish. In April 2016, the Pennsylvania Housing Finance Agency (“PHFA”) provided translations in four other languages. According to the PHFA’s guidance issued with these changes, lenders are encouraged to send an alternative language notice when the lender is aware that the customer is likely to communicate in the alternative language.

4 As of December 20th, 2016, the New York 90-Day Pre-Foreclosure Notice is required to be provided in one of the six most common non-English languages if the servicer knows the borrower communicates in one of the specified languages.

5 Reyes vs. Superior Court, 173 Cal. Rptr. 267 (Cal. Ct. App. 1981). The court also clarified that this applies not only to original contracts, but also any subsequent documents that modify the original contract or substantially change the rights and obligations of the parties.

6 The GSEs have several existing options and requirements in place; Fannie Mae in particular provides Spanish translations of the crucial origination documents and requires its servicers to employ multilingual staff or to make translation services available. The CFPB includes certain questions regarding an institution’s policies and procedures for servicing loans held by LEP borrowers in Module IV of its Supervision and Examination Manual, as well as guidance and checklist items.

7 Three major actions in recent years have highlighted this trend, two of which resulted in multimillion dollar penalties. The CFPB took action against a major credit card company in December of 2013 for alleged deceptive acts or practices when a credit card product had been marketed in Spanish to customers in Puerto Rico, but the callers did not have a uniform script and all written materials were in English. In June 2014, the CFPB instituted penalties against a bank that allegedly excluded borrowers who indicated they preferred to communicate in Spanish or had a mailing address in Puerto Rico from a credit card debt-repayment program it offered. In a recent federal case, United States v. Home Loan Auditors LLC et al., No. 3:16-cv-04839, the defendants allegedly “exploited” the clients’ LEP status by proving marketing materials in Spanish and then requiring clients to sign English-language contracts that often were not translated.