This piece originally appeared in the November 2022 edition of MReport magazine, now online.
In the last year we have entered a brave new world in the mortgage lending industry. Refinancing volume is gone, probably won’t be heard from for some time. Lenders and mortgage companies are reconfiguring their operations to accommodate the margin squeeze. And decision makers are scouring the landscape for new and/or improved sources of income.
As collection volume decreases, that research includes consideration of new or underserved markets. We’ve heard a lot about the further penetration of the millennial homebuyer segment.
We’ve also observed more than a few mortgage lenders stepping up campaigns for niche products like non-QM mortgages or 40-year loans. Yet as the origin world moves to recoup some of its lost revenue based on refinancing, there is an entire market left virtually untapped.
There were at least 61.6 million people in the United States (both foreign and US-born) who spoke a language other than English at home in 2013. While some were fluent in English, approximately 41 percent (25.1 million listen)) were considered Limited English Proficient (LEP), meaning they reported speaking English less than “very well”.
These numbers, by all accounts, have grown since the data was collected and will only continue to grow over the next few years.
There is no evidence to suggest that LEP adults are disinclined to purchase homes, making this a prime market segment for potential new clients.
America’s LEP population is also attracting the attention of regulators and legislators. Earlier this year, the Federal Housing Finance Agency (FHFA) implemented a requirement for mortgage lenders to include the Supplemental Consumer Information Form (SCIF) in their loan packages in order for such mortgages to be sold to GSEs. . The SCIF, in essence, signals the language preference of a prospective borrower. The Consumer Financial Protection Bureau (CFPB) has also clearly expressed a desire to see more LEP services made available in the mortgage and lending service sectors. Additional activity at the state level, combined with signals at the federal level, strongly suggest that mortgage lenders may soon have a compliance incentive to provide more comprehensive language resources to LEP consumers as well.
Whether driven by compliance potential or market potential, it’s becoming clear that creators have incentives to review and develop their LEP assets and programs. In too many cases, it is clear that much more work needs to be done if sustainable success is to be expected.
Other LEP resources
This starts, of course, by making adequate resources available to potential LEP borrowers. Does the lender’s website or app make application instructions, FAQs and other educational materials, or even loan documents available in languages other than English?
For physical mortgage lenders, do your consumer contact specialists, LOs and branch representatives have a means by which they can communicate clearly with potential non-English customers, as well as materials that applicants can refer to throughout the process?
Does the lender have sufficient means to even identify which of its prospective customers or borrowers are LEP and protocols to make LEP borrowers aware of those assets? Being compatible with LEP doesn’t just stop at the technological level. The mortgage process, while moving towards greater automation, is still based on relationships. People who are fluent in any language still need useful skills when it comes to buying a home. Lenders looking to serve the LEP market would do well to hire more than a few bilingual LOs or freshen up their non-English marketing flyers.
Strategy and leadership
While there are certainly technologies, service providers, and other sources of help available to lenders looking to bolster their LEP capabilities, it starts, like nearly everything when it comes to process changes, at the top. In the past we have seen “marketing campaigns” for non-English speaking markets which amounted to little more than token bloats or pledges.
Serving the LEP market requires positioning, resources, leadership and execution, just like implementing a new LOS or launching a TPO platform.
The mortgage lender seeking to position itself credibly and effectively to serve the LEP community must start with a careful strategy. Consulting with peers, community leaders, and even third-party advisors would be a great start for lenders lacking in-house LEP expertise.
Furthermore, just as a regional bank carefully researches a potential new geographic market, a lender looking to prioritize LEP service should do the same. Research community and culture. Understand LEP consumer patterns at all levels of purchase and investment. And also have systemic and continuous quality control protocols. Past half-hearted efforts to enter LEP communities have been known to accidentally stumble upon cultural nuances or even a clear understanding of the language.
Building an LEP initiative or strategy on the foundation of a few multilingual employees or a translation app is not a recipe for sustainable success.
A long-term solution, not a quick fix
Of course, any LEP-based strategy will require budget allocations that go beyond startup and consider the requirements for continued long-term operation. This is no more a one-time process than any initiative designed to kickstart a platform or service that will ultimately sustain itself and generate revenue.
No bank looking to build new branches in a geographic market in which it was not previously present would budget just for kickoff, then leave those branches to fend for themselves. The same goes for a lender looking for success in the LEP market.
Again, a mortgage originator hoping to court the LEP market will need robust resources to do so. Research and well-planned, thorough marketing is a good start. The lender will also need systemic resources such as technology and trained personnel to make the entire application and loan process, including support, easily accessible to an LEP borrower (apply through closing and beyond). But none of these investments will succeed without solid execution.
This means having a transparent top-down strategy that is documented and made clear to the entire organization. This means ongoing training and supervision as well as clearly defined metrics.
And it means consistent management at all levels to ensure continuous quality and improvement.
Finally, the mortgage lender seeking to successfully incorporate the LEP market must have a clear vision. Launching an advertising campaign with the long-term goal of recouping lost revenues until the next round of refinancing arrives carries the potential for numerous disastrous shortages and even outright bankruptcy. Again, entering (or seeking to build a more robust presence in) the LEP market is little different, in terms of planning and execution, from a decision to enter the wholesale lending business or expanding a geographic presence. However, the potential for significant and sustainable success is very clear.
This is a market that will likely only continue to grow for the foreseeable future. It probably won’t involve a drastic reconfiguration of the lender’s product mix. What it will require, however, is commitment, investigation and execution. It is no coincidence that these are the prerequisites for success in almost any new venture.