WASHINGTON, D.C. – (RealEstateRama) — A report released today documents how borrowers with limited English proficiency (LEP) face a heightened vulnerability to fraud and predatory practices when navigating the financial system.
The report, released by Americans for Financial Reform, urges Federal regulators to make it easier for people with LEP to understand and navigate the financial system, especially the mortgage loan market. Empire Justice Center, along with seven other organizations, contributed to the report.
Financial industry players conducted market research to tailor their sales pitches to members of the LEP community, the report found, including advertising financial products to LEP consumers in their own languages. But once a product had been sold, consumers typically receive follow-up communications – including complicated mortgage options and terms – exclusively in English.
This becomes a major problem if the homeowner falls behind on their mortgage, needs to restructure their loan, or needs to communicate at all with the financial entity. Complicated legal conversations are exacerbated by the financial entity’s unwillingness, or inability, to translate essential documents. The report also found that some borrowers may not have fully understood the loan they signed in the first place.
One Spanish-speaking couple, after making steady payments for 10 years on what they thought was a fixed-rate fully-amortizing mortgage, found that they had not put a dent in the principal balance 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.
“Banks and servicers must provide better language services in the mortgage industry to ensure that LEP homeowners are making informed decisions about their loans, and getting assistance for the servicing of their loans in the homeowner’s preferred language,” said Maria DeGennaro, Staff Attorney at Empire Justice Center. “Otherwise, New York will see a continued spiral of destruction in the most vulnerable communities, by the threat of foreclosure and homelessness.”
A companion paper tells the stories of several LEP homeowners who belatedly discovered unfavorable mortgage terms and had great difficulty securing loan modifications.
“Brokers and loan originators sometimes do not work in the best interest of their clients,” said Alberto Munera, Executive Director of La Fuerza Unida, a HUD-certified housing counseling agency that works with many LEP homeowners. “Deceptive practices financially harm those whose primary language is not English, especially Latino immigrants, thus preventing them from building assets and wealth.”
Federal regulators have the power to ameliorate these problems, but have yet to act. 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.
Ruhi Maker, Senior Attorney for Empire Justice Center said that every borrower should be able to access information regarding their loans, and bemoaned the harmful situations that LEP borrowers confront on a daily basis. Faced with the burden of finding their own interpreter or missing essential information relevant to their housing, many look to friends and family members who are unqualified to interpret such intricate legal and financial conversations.
“LEP New Yorkers often have to rely on their own children, even as young as 10 years old, to interpret for them when a bank does not provide qualified interpreters,” Maker said, adding that Federal regulators must take action to help prevent such harmful practices.
In 2014, there were 25.3 million U.S. residents, 9 percent of the population, with limited proficiency in English. In New York State alone, 5.6 million people speak a language other than English at home. Of the 2.6 million who speak Spanish in New York, 1.2 million are considered LEP.
Collaborators of the reports 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.
ABOUT EMPIRE JUSTICE CENTER: Empire Justice Center is a statewide, multi-issue, multi-strategy, public interest law firm focused on changing the “systems” within which poor and low income families live. Empire Justice protects and strengthens the legal rights of people in New York State who are poor, disabled or disenfranchised through: systems change advocacy, training and support to other advocates and organizations, and high quality direct civil legal representation. Empire Justice has offices in Albany, Rochester, Westchester and on Long Island.
Contact: Ruhi Maker (Rochester) 585-314-0512 rmaker (at) empirejustice (dot) org
Maria DeGennaro (Long Island) 631-650-2319 mdegennaro (at) empirejustice (dot) org