In a newly released paper, Americans for Financial Reform and its coalition partners urge regulators to make it easier for people with limited English proficiency (LEP) to understand and navigate the financial system, especially the mortgage loan market.
In 2014, there were 25.3 million U.S. residents, 9 percent of the population, with limited proficiency in English. LEP borrowers are unusually vulnerable to fraud and predatory practices. “Many industry players conduct market research to tailor their sales pitches to members of the LEP community, including advertising financial products to LEP consumers in their own languages,” the paper points out. But once a product has been sold, consumers typically receive follow-up communications – including complicated mortgage options and terms – exclusively in English.
A companion paper tells the stories of several LEP homeowners who belatedly discovered unfavorable mortgage terms and had great difficulty securing loan modifications. One Spanish-speaking couple, after ten years of steady payments on what they had understood to be a fixed-rate fully-amortizing mortgage, found that they had not put a dent in the principal because it had actually been an interest-only loan. To make matters worse, their monthly payments were about to increase from $1,983 to $3,350. A friend of the couple had served as their interpreter after referring them to the lender; in hindsight, they realized that this person may have had financial ties to the loan officer, the title company, and the closing attorney.
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Federal regulators have the power to ameliorate these problems. The paper urges the Consumer Financial Protection Bureau and other regulators to take a number of specific steps, including requiring that key documents be made available upon request in at least eight languages (Spanish, Chinese, Vietnamese, Korean, Tagalog, Russian, Arabic, and Haitian Creole); improving language access to federal complaint and counseling services; providing guidance to financial institutions on language-access standards; and improving tracking of the preferred languages of mortgage applicants across the country.
New AFR Paper Calls For Fair Treatment Of Homeowners With Limited English Proficiency
As the demographics of the United States evolve, the number of U.S. residents for whom English is not a first language and who speak English with limited proficiency has increased dramatically. In 2014, approximately 9 percent of the U.S. population was limited English proficient (LEP). These individuals use financial products and services, but those who are not proficient in English have greater difficulty navigating the marketplace. Because the financial services market is aimed primarily at English language speakers, people with limited English proficiency may be confused about the products and services marketed to them, encounter barriers to making well-informed decisions, and are vulnerable to abusive practices. It is imperative that we protect consumers for whom English is not a primary language.
While this brief focuses on housing as a first step in expanding market access for limited English proficiency borrowers, comparable measures are needed throughout the financial marketplace. The mortgage market is a crucial part of the national economy as well as a key building block of wealth in communities and enhancing access for LEP homeowners would support the growth of the housing sector and of LEP market participation more broadly. Unfortunately, LEP borrowers are among the most vulnerable consumers targeted by fraud and predatory practices. The Consumer Financial Protection Bureau (CFPB) in particular plays an important role in protecting all consumers in the financial services marketplace, including LEP consumers, and is in a unique position to lead on this issue. With its multilingual, online communications to LEP consumers, the CFPB has taken some important initial steps in responding to the changing dynamics of today’s consumer market, but there is much more to be done to meet American consumers’ linguistic and cultural needs. They are some of the very families we had in mind when fighting for the creation of the CFPB. These families should be held at the forefront of the CFPB’s and other agencies’ initiatives. The CFPB should work with the Federal Housing Finance Agency (FHFA) and the Federal Housing Administration (FHA) of the Department of Housing and Urban Development (HUD), as well as the federal banking agencies, to expand limited English proficiency access and align requirements across agencies.
Towards these goals, we make the following recommendations for improving the mortgage marketplace for limited English proficiency consumers:
- Enhance mortgage servicing protections for homeowners with limited English proficiency.
- Provide protections for mortgage applicants with limited English proficiency.
- Expand existing supervision and examination procedures, beginning with mortgage oversight, to include a review of language accessibility.
- Improve language access to the CFPB’s Consumer Complaint Services.
- Improve opportunities for mortgage applicants and homeowners with limited English proficiency to find a HUD-approved housing counseling agency with a counselor who speaks their preferred language.
- Provide affirmative written guidance/regulations to financial institutions on standards for addressing language access.
- Update data fields for the Home Mortgage Disclosure Act (HMDA) to include the preferred language spoken by the applicant.
- Establish a federal interagency working group to examine strategies for improving data collection and tracking language preferences of borrowers through the mortgage process, including revision of the mortgage application and the Uniform Borrower’s Assistance Form (UBAF).
Language access remains a significant hurdle for many communities seeking access to the financial marketplace. In 2014, approximately 25.3 million individuals, some 9 percent of the U.S. population, were considered limited English proficient (LEP). Limited English proficient refers to anyone above the age of 5 who reported speaking English less than “very well,” as classified by the U.S. Census Bureau. Approximately five-sixths (83.4%) of all LEP residents speak one of eight languages: Spanish, Chinese, Vietnamese, Korean, Tagalog, Russian, Arabic, and Haitian Creole. About 64% of the LEP population speaks Spanish, followed by Chinese, spoken by 6% of the limited English proficiency population.
Collectively, Asian Americans and Pacific Islanders (AAPI) speak more than 100 different dialects and represent more than 50 different ethnic groups. Many low-income AAPI communities also include a high proportion of LEP families. Approximately 76% of Asian Americans speak a language other than English at home. Of these, 46% are considered limited English proficient.
Full access to financial services remains a formidable challenge for LEP consumers. Many industry players conduct market research to tailor their sales pitches to members of the LEP community, including advertising financial products to LEP consumers in their own languages. But what happens when it is time to sign the loan papers and after the sale is completed? Typically, once LEP consumers are sold the product, they receive complicated information regarding all of the important terms in English. They often rely on children to understand legal terms and other highly-specialized terminology. Where are the language services or translated documents when a family needs help refinancing or faces financial hardship and seeks assistance?
Many LEP homeowners encounter enormous difficulties accessing loan modifications because servicers do not have staff who are able to communicate in their languages. In a 2014 survey designed to understand servicer compliance with the CFPB servicing regulations, 48% of housing counselors reported that servicers rarely or never provided written communications to LEP borrowers in their preferred language. A counselor in Oregon City, Oregon stated: “I have clients whose primary language is Spanish, Chinese, Russian, etc. I have never seen documents provided in any language other than English.”4 In addition, 44% of counselors said assigned points of contact were rarely or never fluent in the borrower’s preferred non-English language. A housing counselor from Chicago stated: “My clients…never received any translation service from their servicers.”
In New York State, 5.6 million people speak a language other than English at home.6 Of the 2.6 million who speak Spanish, 1.2 million are considered limited English proficiency. On Long Island where 281,000 residents are LEP, homeowners are encountering problems in accessing loan modifications. For example, a Spanish speaking homeowner who later became a client of a service provider in Empire Justice Center’s network moved out of his home upon receiving an initial foreclosure notice because he did not realize that he might be eligible for a loan modification. Another Spanish-speaking homeowner was solicited by a scammer about foreclosure prevention “help.” The homeowner paid $14,000 to the scammer but did not receive any assistance in saving his home before finding free legal assistance.
See full PDF below.
The organizations that collaborated on the papers include: National Consumer Law Center, National CAPACD, National Council of La Raza, Empire Justice Center, National Housing Resource Center, Consumer Action, National Fair Housing Alliance, and MFY Legal Services, Inc.
Americans for Financial Reform is a nonpartisan and nonprofit coalition of more than 200 civil rights, consumer, labor, business, investor, faith-based, and civic and community groups. Formed in the wake of the 2008 crisis, AFR is working to lay the foundation for a strong, stable, and ethical financial system – one that serves the economy and the nation as a whole.
Thanks to the work of Consumer Action, National CAPACD, National Fair Housing Alliance, and an Americans for Financial Reform volunteer, this press release is available in eight other languages: Spanish, Chinese, Vietnamese, Korean, Tagalog, Russian, Arabic, and Haitian Creole.
A summary of the two papers is available in English.