Two regulatory agencies are urging lenders to provide disclosures to consumers in the language of their choice, a move that could presage future requirements that lenders make more accommodations for borrowers not proficient in English.
The Federal Housing Finance Agency and the Consumer Financial Protection Bureau have taken steps in recent weeks for lenders and financial institutions to provide outreach to non-English speakers, particularly Spanish speakers.
The FHFA
Meanwhile, the CFPB
Taken together, the actions indicate a trajectory within the Biden administration toward requiring disclosures for consumers with limited English proficiency. Consumer advocates have suggested for years that mortgage servicers provide documents in Spanish — and potentially other languages — particularly to vulnerable consumers receiving loss mitigation.
“The belief is that borrowers who are not English proficient do not get good customer service, and in order to lay the groundwork for receiving loss mitigation in Spanish, the FHFA wants to have the language preference recorded so they can ultimately ask servicers why they aren’t communicating in Spanish,” said Chris Willis, a partner at the law firm Troutman Pepper.
The FHFA’s new language-preference mandate and CFPB’s Spanish disclosures come as regulators are examining financial institutions’ fair-lending practices. Roughly 13% of the U.S. population speaks Spanish at home, according to the Census Bureau.
Collecting information from borrowers on their preferred language is a reasonable requirement, said Scott Olson, executive director of the Community Home Lenders Association, a trade group. Lenders primarily are concerned about anything that adds costs to the home-buying process.
“If you already have a borrower that doesn’t speak English, it’s good to try to make sure that we’re reaching out to people in a way that works,” Olson said. “But the rubber hits the road when there are blanket requirements to provide standardized documents that cost money but don’t do that much.”
Still, the FHFA is requiring that lenders not just collect a borrower’s language preference but also any homebuyer education or housing counseling that the borrower has received. Borrowers’ responses are voluntary. But the information will be analyzed, allowing the FHFA to determine whether its outreach is working.
“The mandatory use of non-English languages and the analysis of outcomes based on language preference” could result in regulators asserting that Spanish-speaking borrowers didn’t get loss mitigation as often, Willis said.
FHFA acting Director Sandra Thompson, who has been confirmed to lead the agency but has not yet been sworn in, said the requirement to get borrowers to fill out a supplemental consumer information form will contribute to an “equitable housing finance system.”
"Collecting language preference and housing counseling information provides mortgage applicants with an additional method to inform lenders of their needs, enabling the industry to more fully respond to the nation's growing diversity," Thompson said in the FHFA’s press release.
CFPB Director Rohit Chopra said in a blog post that the collection of language-preference information does not violate the Equal Credit Opportunity Act, which prohibits creditors from discriminating against credit applicants based on age, color, marital status, national origin, religion or sex.
"The CFPB is eager to see advances in broader language access to better serve all borrowers," Chopra said.
