For mortgage loans to be eligible for sale to Freddie Mac or Fannie Mae, the Federal Housing Finance Agency (FHFA) recently announced that mortgage lenders will need to include in loan packets the Supplemental Consumer Information Form (SCIF), which registers a borrower’s language preference. Although the criterion might seem unimportant, it’s probably the first of numerous additional criteria lenders will have to consider when dealing with borrowers with Limited English Proficiency (LEP). Although offering resources for LEP consumers is not new, lenders and servicers will likely need to make significant adjustments to comply with the legal requirements for those resources and the specifications regarding which services must be offered.
LEP people are those who “do not speak English as their first language and who have a limited capacity to read, speak, write, or understand English,” according to the Office of Economic Impact and Diversity. Before recently, the Dodd-Frank Act’s provisions on unfair, deceptive, and abusive acts and practices (UDAP) and the Equal Opportunity Act (ECOA) generally governed mortgage lenders’ responsibilities to LEP borrowers. However, there were not many rules and specifications for the provision of resources.
It didn’t take long for the Consumer Financial Protection Bureau (CFPB) to indicate that it would want to see more LEP services made available, notably in the mortgage servicing and lending sectors, after the transition of Federal administrations in 2021. As a result, in January 2021, the CFPB released recommendations for following these rules and creating compliance management systems and guiding principles for servicing LEP consumers.
The statement also advised lenders and servicers on reducing ECOA, UDAAP, and other legal concerns. It discussed issues such as what aspects financial institutions might consider when deciding which products or services to offer in other languages and what factors lenders may take into account when considering whether or not non-English language services are necessary. To read more on this, click here.
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