Does Your Fair Lending Policy Need Updated?
On September 15, 2016, HUD issued “guidance” for “persons with Limited English Proficiency” (LEP) that was effective immediately. The guidance applies to mortgage lenders, which includes most financial intuitions.
LEP refers to a person’s limited ability to read, write, speak, or understand English. LEP is not a prohibitive basis under ECOA or FHA but there is a high correlation between LEP and race and national origin. How you provide assistance to these persons could affect your fair lending status.
- Do you regularly study the demographics of the communities that you serve to determine ethnic diversity? How do you address any minority populations? What languages may need assistance?
- How do you determine whether a person is LEP? Even English speaking persons have literacy issues.
- As part of your application process, do you ask whether assistance is needed in reading and understanding loan documents?
- Do you have an access plan? Have you identified assistance options? Staff members of the same ethnicity that can interpret? Local ethnic organizations that can provide assistance? Professional interpreter/translation service provider? Use of an individual translator?
- Will you allow an English-speaking minor child to interpret on behalf of parents?
- Do you make all loan documents (not just the application) available in an different language? Does your document vendor provide this service?
- How will you document what assistance services were provided?
- What are the legal ramifications of any of your processes?
HUD has provided some answers to additional questions in its LEP FAQ here, but you’ll still need to contextualize this issue for your institution. Even though this is only “guidance” there will be some level of LEP expectation in fair lending exams, particularly if your institution serves highly diverse communities. You should begin now to address LEP in your fair lending risk assessments, policies, operational procedures, and staff training. Sounds like another 2017 Compliance Committee initiative!