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Foreign Language Mortgage Disclosures
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by Timothy A. Raty – Compliance Specialist, Docutech Corporation
Although English is the official language of the governments of the United States, there are millions of U.S. residents who speak, read, and write in a different language in their personal and public interactions. These interactions also include those that are performed in the mortgage loan business. Loans are arranged and made with people who use one of the many different languages found throughout the world, on a daily basis.
Due to this, some legal jurisdictions have enacted laws requiring the translation of certain loan documents into the language of the borrower, so that the borrower can fully understand the terms of the agreements they are entering into. At this time, Arizona, California, the District of Columbia, Oregon, and Texas have laws for such purposes (albeit the extent of such laws varies between them).
Docutech is always striving to make sure our clients are in compliance with all mortgage-related laws. To this end, this article will provide a summary of these jurisdiction's foreign language requirements.
Arizona requires every premium finance company (a person or company engaged in the business of financing insurance premiums) to provide brokers, agents, and managing general agents both English and Spanish copies of the disclosures required by Title I of the Consumer Credit Protection Act (15 USCA §§ 1601 through 1667). The State also requires that all premium finance agreements (an agreement wherein the insured promises to pay a premium finance company the amount advanced to an insurance producer in payment of an insurance contract) contain a notice, in both English and Spanish, that the borrower may request a copy of the Spanish version of this disclosure before signing any documents (see Ariz. Rev. Stat. Ann. § 6-1411).
Furthermore, a specific notice must be added to each consumer lender loan (i.e. basically loans of under $10,000) note or agreement in both English and Spanish, which states the following:
"Note: You may request that the initial disclosures prescribed in the truth in lending act (15 USCA §§ 1601 through 1666j) be provided in Spanish before signing any loan documents." (see Ariz. Rev. Stat. Ann. § 6-631[B])
California has two corollary foreign language disclosure laws (Cal. Civ. Code §§ 1632 & 1632.5). They require the translation of certain documents into Spanish, Chinese, Tagalog (a Philippine dialect), Vietnamese, and Korean, dependent upon whether the terms of the loan are negotiated in one of these languages, unless the negotiations are conducted through the borrower's own interpreter.
Ibid. §§ 1632 and 1632.5 both have separate translation requirements, but compliance with one of the statutes constitutes compliance with the other, if a lender is considered a "supervised financial organization" (see Ibid. §1632.5[c]). A "supervised financial organization" is defined as including most of the major mortgage lending licensing types in California (e.g. licensees under the California Financial Lenders Law [CFLL] and California Residential Mortgage Lending Act [CRMLA]), but does not include licensees under the Real Estate Law (REL). Licensees under the REL may only comply with the requirements of Ibid. § 1632 (see Ibid. §§ 1632[b][4] & [e][2] and 1632.5[b][2])
Ibid. § 1632.5 requires that the lender provide a form created by the Department of Corporations and the Department of Financial Institutions, in the appropriate language, to the borrower. Before the implementation of the "TILA-RESPA Integrated Disclosure" (or "TRID") amendments to Federal Regulation Z (12 CFR Pt. 1026; see 78 FR 79730 [2013]), the forms were similar to the Federal Good Faith Estimate form required under Federal Regulation X (either 12 CFR Pt. 1024 or 24 CFR Pt. 3500). Shortly after "TRID" took effect on October 3, 2015, the California Department of Business Oversight announced that they would be replacing these forms with translated copies of the Loan Estimate required under Regulation Z, though up through January, 2017 both versions are still available on their website (here and here).
While these forms copy those of Federal forms, it does not replace them. However, they do contain a summarization of the loan terms and must be provided no later than three business days after receipt of the borrower's application. If any of the loan terms that are promulgated in the form materially change before consummation, a revised version must be disclosed.
Cal. Civ. Code § 1632 has a complex scheme for translating documents, dependent upon what type of loan is being offered. The disclosures that need to be translated can include the statement required by Cal. Bus. & Prof. Code § 10240, disclosures required under Federal Regulations M or Z, and disclosures required under Cal. Fin. Code Divisions 7 or 9. Also, the contract or agreement for the loan must be translated into the language of the borrower.
The District of Columbia
Within three business days of an application for a non-conventional mortgage loan (a non-fixed rate loan that has an amortization period of less than thirty years; see D.C. Code Ann. § 26-1101[12A]), a mortgage loan originator, loan officer, mortgage lender, or mortgage broker must give a specific disclosure to the borrower, which summarizes the key financial aspects of the loan (e.g. the interest rate, when it will change, whether the borrower can afford it, etc.). Inter alia, the form must be either in plain English or in the language that the licensee used in presenting the loan to the borrower (see Ibid. § 26-1113[a-1]).
Under Or. Rev. Stat. § 86A.198, if a banker, broker, or loan originator both advertises in a non-English language and either offers to negotiate, does negotiate, or makes a loan to a borrower in a language other than English, he must provide English copies of the Good Faith Estimate, the Truth-in-Lending Disclosure, and a statement notifying the borrower that the loan documents will be in English and advising the borrower to obtain translation assistance. Copies of these forms must also be given in the language that was used for a substantial part of the communications with the borrower.
Oregon has authorized the Director of Consumer and Business Services to develop and distribute these forms in the three most used non-English languages in the State (Spanish, Russian, and Vietnamese).
Despite the fact that Oregon's statutory law requires copies of the GFE and TIL to be provided and specifically refers to the Federal administrative law enacted on January 1, 2010, the Division of Financial Regulation has held that for loans subject to "TRID," English and translated copies of the Loan Estimate and Closing Disclosure must be provided in lieu of the GFE and TIL (see Or. Admin. R. 441-865-0060[1][g], [j], & [k] and the DFR website).
Texas law contains several translation requirements for various disclosures.
First, if the terms of a contract for a consumer loan under Tex. Fin. Code Chapter 342, a retail installment transaction under Ibid. Chapter 348, or a home equity loan regulated by the Office of Consumer Credit Commissioner, are negotiated in Spanish, a Spanish translation of the Truth-in-Lending Disclosure (the version for closed-end transactions) must be provided to the borrower (Ibid. § 341.502[a-1]).
Texas administrative law has created versions of these forms, with slight variations that may be given dependent upon whether the loan is subject to Tex. Fin. Code Chapter 342, Subchapters E, F, or G. There is a model form that may be used for retail installment transactions, but this version is not required to be given (see Tex. Admin. Code tit. 7, §§ 90.701 through 90.706).
Note that despite the fact that "TRID" became effective on October 3, 2015, Tex. Fin. Code § 341.502(a-1) still requires "a form identical to disclosures required for a closed-end transaction under 12 C.F.R. Section 226.18" to be provided. 12 CFR § 226.18 is the Federal Reserve Board's (FRB) version of Regulation Z, which does not contain provisions similar to "TRID," but rather requires the TIL disclosure for all transactions subject to the FRB's version of Regulation Z (e.g. automobile loans). However, Texas modified their requirements in 2015 for loans subject to Subchapter G, requiring them to provide Spanish copies of the Loan Estimate and Closing Disclosure required under "TRID," based on the Model Forms promulgated under 12 CFR Pt. 1026, App. H (effective January 1, 2017; see 40 Tex. Reg. 5621 & 7635 [2015]).
Second, the specific disclosure required by Texas Const. Art. 16, § 50(g) (commonly referred to as the "Twelve Day Disclosure"), which must be given when making a so-called "50[a][6] Loan", must also be given in the language that was used when discussing the loan (see Ibid. § 50[h]).
Finally, the notice required by Tex. Admin. Code tit. 7, § 90.105, which notifies the borrower of the means necessary to complain about the lender to the Office of Consumer Credit Commissioner, must be given in the language that the loan transaction was conducted in.
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