Servicing The Hispanic Homeowner
Michael Bates, Thursday 13 September 2007 - 14:10:19
Servicing Management, December 2005.
In one way or another, many things that happen at loan origination tend to spill down the line to loan servicing. Title problems and fraudulent activity are a couple scenarios with which many servicers can identify.
Today, originators are seeking to expand their lending operations within the huge Spanish-speaking demographic. That population is growing at a feverish pace in the U.S., and homeownership opportunities are growing with it. Part of expanding the lending universe for those who speak primarily Spanish includes fundamental changes in the negotiations and documentation.
But this approach will inevitably give rise to interesting challenges for mortgage servicers. If originators discuss loan options with potential homeowners in Spanish, will these potential borrowers expect loan servicers to do the same when they become customers? Or, if originators provide Spanish-language documentation at the closing table, will those borrowers anticipate receiving servicing-related documents throughout the life of the loan?
During the California Mortgage Bankers Association’s Western States Loan Servicing Conference, held recently in Las Vegas, a panel of experts addressed Spanish-speaking borrower issues and what they mean to servicing shops. Fannie Mae, for instance, has been busy tweaking the verbiage of its core lending documents to accommodate Spanish-speaking borrowers.
“We have taken and translated into the Spanish language the vast majority of Fannie/Freddie uniform instruments,” noted Fannie Mae’s Thomas King. “Almost all of the notes for the popular products, and all of the riders and addenda that go with those various notes - they have been translated.”
He said that Fannie Mae has translated a total of 111 documents, which are - or will be soon - available at efanniemae.com. To accomplish this enormous task, the company employed a team of Fannie Mae staffers and a vendor that conducted translations with the aid of a software product. Then, outside counsel double-checked the results to ensure that all was copacetic.
Non-executable
A compelling fact about these translated documents, King remarked, is that they are functionally limited in their use.
“They’re non-executable,” he explained. “The early research we did before we actually started the translation process told us that, in some states, a document that was executed entirely in Spanish would not be recordable, and there would be some enforcement issues.
“In some states, in order to record a Spanish-language contract, one would have to go through court proceedings and have the court specifically authorize - on a transaction-by-transaction basis - the recording of an instrument,” King said.
Fannie Mae decided that it didn’t want lender partners to go through that kind of complicated process, so the documents are for informational purposes only. The idea is to help Spanish-speaking borrowers learn the lending process and understand the contracts they will sign.
King added that there were a couple main reasons why Fannie Mae chose to start translating all these documents. The first had a lot to do with the dynamics behind lending to this demographic.
“There’s a huge proportion of the United States population today that speaks Spanish,” he said. “And the housing survey that Fannie Mae did back in 2003 found that those who denote themselves as predominantly speaking Spanish trailed the general population in understanding the home-buying process.”
The second reason Fannie Mae began translations had its origins with a section of California’s Civil Code - enacted in 1976 - catching up with the mortgage industry. In California, if trade or negotiations are conducted primarily in Spanish, a potential borrower must receive a translation of the contract or agreement prior to execution.
“One of the big driving factors for generating these documents was the California statute,” explained Robert J. Curtis, an attorney with Irvine, Calif.-based Curtis Law Group.
Ambiguity
Curtis noted that the lending industries have been able to scoot around the statute in the past because “primarily in Spanish” is quite ambiguous.
“The requirement for translation only kicks in when the original negotiations were primarily conducted in Spanish. That is really vague,” he remarked. Does “primarily” indicate 50% of the negotiations? Maybe 25%? The lack of specificity has enabled lenders to operate in that gray area.
Also, he explained, many lenders have simply avoided the statute’s provisions. If a lender made it company policy to conduct business in English and to not provide oral translation services, that company was generally in the clear. Translated documents would not be required.
However, Curtis remarked, “The reality is that the Spanish-speaking market for mortgage products is growing.” Countless lenders want to enter this market or expand their operations within it, but they have expressed concerns about complying with the law. To effectively tap this market segment, astute lenders will comply with the statute, which requires oral and written accommodations for Spanish-speaking borrowers.
“The California statute is a good starting point for what is probably going to be expected of people in the future - not only in California, but in other states,” he added. Texas has some requirements similar to those in California. Arizona, Illinois and Florida all have requirements for translating loan documents, but they do not yet apply to mortgage loans.
The fact is, how originators deal with Spanish-speaking borrowers is changing, and that will most likely affect how servicers interact with those same borrowers. In California, some of that is already apparent.
According to California law, Curtis explained, items such as traditional monthly statements do not need to be translated. Interestingly enough, the translations need to come as servicing functions grow more complex.
“Documents subsequent to the original contract also need to be translated,” he said. “How they define that is ‘any subsequent document making substantial changes in the rights and obligations of the parties.’”
Which docs?
Translating loan modifications or forbearance agreements makes sense in this context. But Curtis pointed to cases in California and Arizona (where consumer loans are protected) indicating that documents such as notices of default should also be translated.
“You wouldn’t think it’s a change in the parties’ rights and obligations,” he said, but more and more evidence seems to suggest that anything that “moves a transaction to another level” is going to have to be translated.
For shops that service these borrowers’ mortgages, affected documents could conceivably include those that address servicing transfers, address changes, interest rate alterations, changes in payment status (delinquency notices) and collection notices.
But in the meantime, servicers are largely out of the proverbial loop, from a compliance perspective.
“We have no requirements for Spanish translations that we impose upon our servicers,” King says. “But we have some tips.”
He noted that the first strategy servicers should pursue is ensuring that oral communications with Spanish-speaking borrowers are conducted fluidly. It’s important to have bilingual customer service representatives available within call centers, as well as within collections and default servicing groups.
These employees must be able to communicate with Spanish-speaking borrowers in readily understandable terminology, King added. To bridge cultural and regional differences, servicing personnel should be fluent in “neutral” or “blended” Spanish dialects.
Considering the growing importance of providing translated documents at origination, it’s also a good idea for servicers to get acclimated with offering written communications in Spanish, he remarked.
Recurring communications - such as payment coupons, billing statements or delinquency notices - should be printed in both English and Spanish. Or, to simplify matters, you can add a message on these communications, written in Spanish, that directs borrowers to a bilingual call center. Messages such as these should also be added to non-routine communications, such as payoff statements or default letters.
In both oral and written communications, King noted, it’s vital to understand that many Spanish-speaking borrowers do not truly grasp the lending and servicing processes. The cultural disparities are sometimes significant.
“Not only do you have a translation process to deal with, but you also have foreign concepts,” he said. The fundamentals behind seemingly routine aspects of lending and servicing - such as escrow accounts, adjustable rate mortgages or negative amortization - are not necessarily well understood among many of these borrowers. These misunderstandings can contribute to delinquency.
In the shop
Scott Holzmeister, vice president of collections and loss mitigation with Wells Fargo Home Mortgage, noted that his shop has developed strategies for working with Spanish-speaking borrowers, but this niche is certainly not bereft of challenges.
He said his operation concentrates on recruiting, training and supervising staff members, and ensuring that quality control processes and technology tools are flexible.
“Sourcing Spanish-speaking team members in servicing locations becomes difficult,” Holzmeister remarked. Depending on where your shops are located, it can be quite tough to find bilingual employees, he said.
Wells Fargo employs non-traditional recruiting methods to meet its needs. The company focuses on colleges where English is predominantly a second language, as well as Hispanic church and neighborhood groups. Spanish-language newspapers also provide the company with strong leads on potential employees.
Once such employees are found, training takes longer and is more difficult, and supervising these individuals can be a challenge, according to Holzmeister. These team members need to have sophisticated knowledge of servicing-related issues, and must be able to communicate those issues in both languages.
At the management level, Spanish-speaking quality control personnel must be available to monitor customer service calls, and bilingual supervisors are also a necessity. “You have to have a channel for escalation that is bilingual,” he explained.
Technology can aid all participants in this process. Spanish-language interactive voice response units are an option, as are bilingual Web-based tools. However, Holzmeister remarked, “It gets costly as you start re-routing, redesigning and recreating those products.”
Beyond the technology expenses associated with Spanish-language communications are the baseline costs that come with these complicated calls. Call times increase, and expenses rise with them.
“You’ll see that your handle time on a Spanish-speaking call is significantly higher than on an English-speaking call,” he said. “If you have to go through that translation, you’re looking at a minimum of 30 to 45 minutes on the call.”
Then there are the documents. Of course, translating key written communications is also expensive, so Holzmeister suggested that servicers be vigilant in what message they decide to translate.
“Consult your legal team about which ones you have to [translate], and then it gets down to a choice of which ones you want in customer service and which ones [you want in] collections and default,” he said.
Overall, Holzmeister said, “There is a balance you have to look at.” If your servicing portfolio is comprised of a small percentage of Spanish-speaking borrowers, how much extra resources should be poured into these initiatives?
That is a question servicing managers will have to answer as homeownership among this demographic rises, which certainly seems to be the case.
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Michael Bates, Thursday 13 September 2007 - 14:10:19
Servicing Management, December 2005.
In one way or another, many things that happen at loan origination tend to spill down the line to loan servicing. Title problems and fraudulent activity are a couple scenarios with which many servicers can identify.
Today, originators are seeking to expand their lending operations within the huge Spanish-speaking demographic. That population is growing at a feverish pace in the U.S., and homeownership opportunities are growing with it. Part of expanding the lending universe for those who speak primarily Spanish includes fundamental changes in the negotiations and documentation.
But this approach will inevitably give rise to interesting challenges for mortgage servicers. If originators discuss loan options with potential homeowners in Spanish, will these potential borrowers expect loan servicers to do the same when they become customers? Or, if originators provide Spanish-language documentation at the closing table, will those borrowers anticipate receiving servicing-related documents throughout the life of the loan?
During the California Mortgage Bankers Association’s Western States Loan Servicing Conference, held recently in Las Vegas, a panel of experts addressed Spanish-speaking borrower issues and what they mean to servicing shops. Fannie Mae, for instance, has been busy tweaking the verbiage of its core lending documents to accommodate Spanish-speaking borrowers.
“We have taken and translated into the Spanish language the vast majority of Fannie/Freddie uniform instruments,” noted Fannie Mae’s Thomas King. “Almost all of the notes for the popular products, and all of the riders and addenda that go with those various notes - they have been translated.”
He said that Fannie Mae has translated a total of 111 documents, which are - or will be soon - available at efanniemae.com. To accomplish this enormous task, the company employed a team of Fannie Mae staffers and a vendor that conducted translations with the aid of a software product. Then, outside counsel double-checked the results to ensure that all was copacetic.
Non-executable
A compelling fact about these translated documents, King remarked, is that they are functionally limited in their use.
“They’re non-executable,” he explained. “The early research we did before we actually started the translation process told us that, in some states, a document that was executed entirely in Spanish would not be recordable, and there would be some enforcement issues.
“In some states, in order to record a Spanish-language contract, one would have to go through court proceedings and have the court specifically authorize - on a transaction-by-transaction basis - the recording of an instrument,” King said.
Fannie Mae decided that it didn’t want lender partners to go through that kind of complicated process, so the documents are for informational purposes only. The idea is to help Spanish-speaking borrowers learn the lending process and understand the contracts they will sign.
King added that there were a couple main reasons why Fannie Mae chose to start translating all these documents. The first had a lot to do with the dynamics behind lending to this demographic.
“There’s a huge proportion of the United States population today that speaks Spanish,” he said. “And the housing survey that Fannie Mae did back in 2003 found that those who denote themselves as predominantly speaking Spanish trailed the general population in understanding the home-buying process.”
The second reason Fannie Mae began translations had its origins with a section of California’s Civil Code - enacted in 1976 - catching up with the mortgage industry. In California, if trade or negotiations are conducted primarily in Spanish, a potential borrower must receive a translation of the contract or agreement prior to execution.
“One of the big driving factors for generating these documents was the California statute,” explained Robert J. Curtis, an attorney with Irvine, Calif.-based Curtis Law Group.
Ambiguity
Curtis noted that the lending industries have been able to scoot around the statute in the past because “primarily in Spanish” is quite ambiguous.
“The requirement for translation only kicks in when the original negotiations were primarily conducted in Spanish. That is really vague,” he remarked. Does “primarily” indicate 50% of the negotiations? Maybe 25%? The lack of specificity has enabled lenders to operate in that gray area.
Also, he explained, many lenders have simply avoided the statute’s provisions. If a lender made it company policy to conduct business in English and to not provide oral translation services, that company was generally in the clear. Translated documents would not be required.
However, Curtis remarked, “The reality is that the Spanish-speaking market for mortgage products is growing.” Countless lenders want to enter this market or expand their operations within it, but they have expressed concerns about complying with the law. To effectively tap this market segment, astute lenders will comply with the statute, which requires oral and written accommodations for Spanish-speaking borrowers.
“The California statute is a good starting point for what is probably going to be expected of people in the future - not only in California, but in other states,” he added. Texas has some requirements similar to those in California. Arizona, Illinois and Florida all have requirements for translating loan documents, but they do not yet apply to mortgage loans.
The fact is, how originators deal with Spanish-speaking borrowers is changing, and that will most likely affect how servicers interact with those same borrowers. In California, some of that is already apparent.
According to California law, Curtis explained, items such as traditional monthly statements do not need to be translated. Interestingly enough, the translations need to come as servicing functions grow more complex.
“Documents subsequent to the original contract also need to be translated,” he said. “How they define that is ‘any subsequent document making substantial changes in the rights and obligations of the parties.’”
Which docs?
Translating loan modifications or forbearance agreements makes sense in this context. But Curtis pointed to cases in California and Arizona (where consumer loans are protected) indicating that documents such as notices of default should also be translated.
“You wouldn’t think it’s a change in the parties’ rights and obligations,” he said, but more and more evidence seems to suggest that anything that “moves a transaction to another level” is going to have to be translated.
For shops that service these borrowers’ mortgages, affected documents could conceivably include those that address servicing transfers, address changes, interest rate alterations, changes in payment status (delinquency notices) and collection notices.
But in the meantime, servicers are largely out of the proverbial loop, from a compliance perspective.
“We have no requirements for Spanish translations that we impose upon our servicers,” King says. “But we have some tips.”
He noted that the first strategy servicers should pursue is ensuring that oral communications with Spanish-speaking borrowers are conducted fluidly. It’s important to have bilingual customer service representatives available within call centers, as well as within collections and default servicing groups.
These employees must be able to communicate with Spanish-speaking borrowers in readily understandable terminology, King added. To bridge cultural and regional differences, servicing personnel should be fluent in “neutral” or “blended” Spanish dialects.
Considering the growing importance of providing translated documents at origination, it’s also a good idea for servicers to get acclimated with offering written communications in Spanish, he remarked.
Recurring communications - such as payment coupons, billing statements or delinquency notices - should be printed in both English and Spanish. Or, to simplify matters, you can add a message on these communications, written in Spanish, that directs borrowers to a bilingual call center. Messages such as these should also be added to non-routine communications, such as payoff statements or default letters.
In both oral and written communications, King noted, it’s vital to understand that many Spanish-speaking borrowers do not truly grasp the lending and servicing processes. The cultural disparities are sometimes significant.
“Not only do you have a translation process to deal with, but you also have foreign concepts,” he said. The fundamentals behind seemingly routine aspects of lending and servicing - such as escrow accounts, adjustable rate mortgages or negative amortization - are not necessarily well understood among many of these borrowers. These misunderstandings can contribute to delinquency.
In the shop
Scott Holzmeister, vice president of collections and loss mitigation with Wells Fargo Home Mortgage, noted that his shop has developed strategies for working with Spanish-speaking borrowers, but this niche is certainly not bereft of challenges.
He said his operation concentrates on recruiting, training and supervising staff members, and ensuring that quality control processes and technology tools are flexible.
“Sourcing Spanish-speaking team members in servicing locations becomes difficult,” Holzmeister remarked. Depending on where your shops are located, it can be quite tough to find bilingual employees, he said.
Wells Fargo employs non-traditional recruiting methods to meet its needs. The company focuses on colleges where English is predominantly a second language, as well as Hispanic church and neighborhood groups. Spanish-language newspapers also provide the company with strong leads on potential employees.
Once such employees are found, training takes longer and is more difficult, and supervising these individuals can be a challenge, according to Holzmeister. These team members need to have sophisticated knowledge of servicing-related issues, and must be able to communicate those issues in both languages.
At the management level, Spanish-speaking quality control personnel must be available to monitor customer service calls, and bilingual supervisors are also a necessity. “You have to have a channel for escalation that is bilingual,” he explained.
Technology can aid all participants in this process. Spanish-language interactive voice response units are an option, as are bilingual Web-based tools. However, Holzmeister remarked, “It gets costly as you start re-routing, redesigning and recreating those products.”
Beyond the technology expenses associated with Spanish-language communications are the baseline costs that come with these complicated calls. Call times increase, and expenses rise with them.
“You’ll see that your handle time on a Spanish-speaking call is significantly higher than on an English-speaking call,” he said. “If you have to go through that translation, you’re looking at a minimum of 30 to 45 minutes on the call.”
Then there are the documents. Of course, translating key written communications is also expensive, so Holzmeister suggested that servicers be vigilant in what message they decide to translate.
“Consult your legal team about which ones you have to [translate], and then it gets down to a choice of which ones you want in customer service and which ones [you want in] collections and default,” he said.
Overall, Holzmeister said, “There is a balance you have to look at.” If your servicing portfolio is comprised of a small percentage of Spanish-speaking borrowers, how much extra resources should be poured into these initiatives?
That is a question servicing managers will have to answer as homeownership among this demographic rises, which certainly seems to be the case.
this content item is from Mortgage Orb
( http://mortgageorb.com/e107_plugins/content/content.php?content.439 )