This piece originally appeared in the November 2022 edition of MReport magazine, online now.
We have entered a brave new world in mortgage lending over the past year. The refinance volume disappeared, probably not heard from for some time. Lenders and mortgage companies are reconfiguring their operations to protect against margin squeeze. And decision makers scour the landscape for new and/or improved revenue streams.
As origination volume declines, this research includes consideration of new or underserved markets. We’ve heard a lot about penetrating more of the millennial homebuyer segment.
We have also seen more mortgage lenders stepping up their campaigns for niche products such as non-QM mortgages or 40-year loans. And yet, as the origination world seeks to recoup some of its lost refinance revenue, there remains a largely untapped market.
There were at least 61.6 million people in the United States (both foreign and American-born) who spoke a language other than English at home in 2013. While some were fluent in English , about 41% (25.1 million) were considered to have limited English proficiency (LEP), meaning they reported speaking English less than “very well”.
These numbers, by all accounts, have increased since the data was collected and will only continue to increase in the years to come.
There is no evidence to suggest that LEP adults are disinclined to buy homes, making them a prime market segment for potential new customers.
The US LEP population is also attracting the attention of regulators and legislators. Earlier this year, the Federal Housing Finance Agency (FHFA) implemented a requirement that mortgage lenders must include the Supplemental Consumer Information Form (SCIF) in their loan records so that these mortgages can be sold. to GSEs. The SCIF, in essence, signals the language preference of a potential borrower. The Consumer Financial Protection Bureau (CFPB) has also made it clear that it would like to see more LEP services made available in the mortgage servicing and lending sectors. Additional activity at the multi-state level, combined with signals at the federal level, strongly suggests that mortgage lenders may soon have an incentive to provide more comprehensive language resources to LEP consumers as well.
Whether driven by potential compliance or market potential, it is becoming clear that initiators have an incentive to review and expand their LEP resources and programs. In too many cases, it is clear that much more needs to be done if lasting success is to be expected.
More LEP Resources
This begins, of course, with the provision of adequate resources for 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 brick-and-mortar mortgage lenders, do your consumer-facing specialists, LOs and branch representatives have a way to communicate clearly with non-English speaking prospects, as well as documents that these candidates can refer to throughout of the process?
Does the lender have sufficient means to even identify which of its prospects or applicants are LEP, and protocols to inform LEP borrowers of these resources? Being compatible with LEP does not only stop at the technological level. The mortgage process, while moving towards greater automation, is still relationship-based. People fluent in any language always need useful expertise when it comes to buying a home. Lenders looking to service the LEP market would do well to hire more than a couple of bilingual LOs or brush up on their non-English marketing flyers.
Strategy and direction
While there are certainly technologies, service providers, and other sources of assistance available to lenders looking to build their LEP capabilities, it starts, like almost everything with process change, at the top. . We have seen “marketing campaigns” for non-English speaking markets in the past that amounted to little more than token bloat or pledges.
Serving the LEP market requires positioning, resources, leadership and execution, much like implementing a new LOS or launching a TPO platform.
The mortgage lender looking to position itself credibly and effectively to serve the LEP community must begin with a careful strategy. Consulting peers, community leaders, and even third-party consultants would be a good start for lenders who lack in-house LEP expertise.
Furthermore, just as a regional bank carefully researches a potential new geographic market, a lender looking to make LEP service a priority should do the same. Research the community and culture. Understand LEP consumer habits at all levels of purchase and investment. And also have systemic and ongoing QC protocols in place. Past half-hearted efforts to enter LEP communities have been known to accidentally stumble over cultural nuances or even a clear understanding of the language.
Building a LEP initiative or strategy on the back of a few multilingual employees or a translation application is not a recipe for lasting success.
A long-term solution, not a quick fix
Naturally, any LEP-based strategy will require budget allocations that go beyond start-up and take into account the requirements of continued long-term operation. This is no more a one-time process than any initiative designed to launch a platform or service that will eventually sustain itself and generate revenue.
No bank looking to build new branches in a geographic market where it previously had no presence would only budget for the start-up and then leave those branches to fend for themselves. The same goes for a lender looking to succeed in the LEP market.
Again, a mortgage originator hoping to woo the LEP market will need strong resources to do so. Research and thorough, well-planned marketing is a good start. The lender will also need system resources such as technology and trained personnel to make the entire application and borrowing process, including assistance, easily accessible to a LEP borrower (application to closing and -of the). But none of these investments will be successful without strong execution.
This means having a top-down, documented and clear strategy for the entire organization. This means continuous training and monitoring as well as clearly defined measures.
And that means consistent management at all levels to ensure continuous quality and improvement.
Finally, the mortgage lender seeking to successfully enter the LEP market must have a clear vision. Rolling out an ad campaign with the long-term goal of recouping lost revenue until the next round of refinance arrives has the potential for many disastrous shortfalls, if not outright failure. Again, entering (or seeking to establish a stronger presence in) the LEP market is little different, in terms of planning and execution, from deciding to enter the wholesale lending business or expand the geographic footprint. However, the potential for significant and lasting success is very evident.
This is a market that is only expected to continue growing for the foreseeable future. It probably won’t involve a radical reconfiguration of the lender’s product line. What it will take, however, is commitment, investigation and execution. It’s no coincidence that these are the conditions for success in just about any new business venture.
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