A residential mortgage lender may be able to successfully greet a potential consumer in his/her language, but what expectations does that create for the entire transaction between lender and consumer?
The Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mac have been engaged in an extensive effort to redesign the Uniform Residential Loan Application (URLA) for use by the mortgage industry. The goal is to reflect changes in the industry and technology and to enhance the data collection for compliance with laws and regulations, including the revised Home Mortgage Disclosure Act (HMDA) regulation, which is effective in January of 2018.
The FHFA and the Consumer Financial Protection Bureau (CFPB) considered including a question on the URLA, asking the consumer to identify his/her language preference.
In response, several trade associations submitted a letter to FHFA, recognizing the need to understand and address the experience of limited English proficiency (LEP) consumers, but urging that the question not be included on the URLA. The concern is that the question could cause confusion to consumers and expose the industry to potential liability.
If the question appears on the URLA, would that lead consumers to believe that the lender would communicate in the preferred language? And if so, are lenders prepared to actually communicate meaningfully in numerous languages?
The tenets of contract law require a “meeting of the minds” in order to create an enforceable contract. If lenders provide communications and/or disclosures in a language other than English to LEP consumers, can there be a “meeting of the minds” when the loan documents are drafted only in English? At least some, if not all, of the documents in a residential mortgage loan closing package may need to be translated into the consumer’s preferred language. Additionally, the ongoing servicing communications with the borrower (both written and verbal) may need to be in that same language. The issue grows exponentially with the number of languages and dialects that are preferred by LEP consumers.
The director of FHFA has recently issued a letter response to the industry indicating that the redesigned URLA will not include a question related to language preference. Instead, the FHFA will undertake other steps, such as surveys or requests for input, to identify and gather information about the language preferences of LEP consumers.Lenders desire to meet the needs of consumers who are seeking new products and services; and recognize that people seeking home ownership are not just those who speak and read English. In fact, the LEP population in the United States has grown significantly in recent years and will likely continue to increase in the future. The issue is not going away and lenders will need to find ways to address the issues of doing business with LEP consumers.
As I learned years ago from a friend, I can appropriately greet a Japanese speaker with “Kon’nichiwa” [?????], but when he/she responds in Japanese to me….well, let’s just say that it is all “Greek” to me. The residential mortgage lending community must continue to innovate in order to more effectively serve the needs of LEP consumers while complying with applicable laws and regulations.
About The Author
Lisa Minkoff’s law practice is focused on the ins and outs of mortgage banking regulatory compliance, residential real estate transactions, and residential title insurance. She has served as in-house counsel for title insurance companies and banking institutions, where she advised on both mortgage origination and mortgage servicing.