Planning for Sustainable Success in the LEP Market

This piece originally appeared in the November 2022 edition of MReport magazine, online now.

We’ve entered a brave new world in mortgage lending over the past year. Refinance volume is gone, likely not to be heard from for some time. Lenders and mortgage businesses are reconfiguring their operations to bolster against margin compression. And decision-makers are scouring the landscape for new and/or improved sources of revenue.

As origination volume declines, that search includes the consideration of new or underserved markets. We’ve heard quite a bit about further penetrating the millennial homebuyer segment.

We’ve also observed a more than a few mortgage lenders ramping up campaigns for niche products such as non-QM mortgages or 40-year loans. And yet, as the origination world moves to recoup some of its lost refinance-based revenue, there’s an entire market left virtually untapped.

There were at least 61.6 million individuals in the U.S. (both foreign and U.S. born) who spoke a language other than English in the home in 2013. While some spoke English fluently, roughly 41% (25.1 million) were considered Limited English Proficient (LEP), meaning they reported speaking English less than “very well.”

Those numbers, by all accounts, have grown since the data was collected, and will only continue to grow in the coming 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 drawing the attention of regulators and lawmakers as well. Earlier this year, the Federal Housing Finance Agency (FHFA) implemented a requirement that mortgage lenders the Supplemental Consumer Information Form (SCIF) in their loan packets in order for those mortgages to be eligible for sale to the GSEs. The SCIF, in essence, reports a potential borrower’s language preference. The Consumer Financial Protection Bureau (CFPB) has also clearly conveyed it would like to see more LEP services made available in the mortgage servicing and lending sectors. Further activity at the level of several states, in combination with the signals at the federal level, strongly suggests that mortgage lenders may soon have compliance incentive to provide more comprehensive language resources for LEP consumers as well.

Whether driven by potential compliance or market potential, it’s becoming clear that originators have incentives to review and build up their LEP resources and programs. In far too many cases, it’s apparent that much more work needs to be done if sustainable success is to be expected.

More LEP Resources
It starts, of course, with 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 brick-and-mortar mortgage lenders, do your consumer-facing specialists, LOs, and branch representatives have a means by which to clearly communicate with non-English prospects, as well as materials those applicants can refer to throughout the process?

Does the lender have sufficient means to even identify which of its prospects or applicants are LEP, and protocols for making LEP borrowers aware of such resources? Being LEP-friendly doesn’t just stop at the technology level, either. The mortgage process, while moving towards increased automation, is still relationship-based. People fluent in any language still need helpful expertise when it comes to buying a home. Lenders seeking to serve the LEP market would do well to hire more than a couple of 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 for lenders seeking to beef up their LEP capabilities, it starts—as does almost anything when it comes to process change—at the top. We’ve seen “marketing campaigns” for non-English speaking markets in the past that amounted to little more than puffery or token commitments.

Serving the LEP market requires positioning, resources, leadership, and execution, much like implementing a new LOS or launching a TPO platform.

The mortgage lender seeking to credibly and effectively position itself to serve the LEP community needs to start with a careful strategy. Consulting with peers, community leaders, and even third-party consultants would be a great start for lenders lacking LEP expertise in-house.

Furthermore, just as a regional bank carefully researches a potential new geographic market, a lender seeking to make LEP service a priority should do the same. Research the community and the culture. Understand the patterns of LEP consumers at all levels of purchase and investment. And have systemic and continuous QC protocols in place as well. Past, half-hearted efforts to enter LEP communities have been known to accidentally trip over cultural nuances or even a clear understanding of the language.

Building an LEP initiative or strategy on the back of a few multilingual employees or a translation app is not the recipe for sustainable success.

A Long-Term Solution, Not a Quick Fix
Naturally, any LEP-based strategy will require budgetary allocations that go beyond start-up and consider the requirements for continuous operation over the long-term. This is no more a one-off process than any initiative designed to kick off a platform or service that will eventually sustain itself and drive revenue.

No bank seeking to build new branches in a geographic market where they previously had no presence would budget only for kick-off, then leave those branches to fend for themselves. The same holds true for a lender seeking success in the LEP market.

Again, a mortgage originator hoping to woo the LEP market will need robust resources to do so. Research and comprehensive, well-planned marketing are a good start. The lender will also need systemic resources such as technology and qualified staffing in order to make the entire application and borrowing process, including support, easily accessible to an LEP borrower (application to closing and beyond). But none of these investments will be successful without strong execution.

That means having a transparent strategy from the top-down, documented and made clear to the entire organization. That means continuous training and oversight 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 needs to have a clear vision. Rolling out an ad campaign with the long-term goal of recouping lost revenues until the next refinance wave comes along brings the potential for numerous and disastrous shortfalls and even total failure. Again, entering (or seeking to build a stouter presence in) the LEP market is little different, in terms of planning and execution, from deciding to enter the wholesale lending business or expanding the geographic footprint. However, the potential for significant and sustainable success is very apparent.

This is a market that is only likely to continue growing for the foreseeable future. It probably won’t involve a dramatic reconfiguration of the lender’s product mix. What it will require, however, is commitment, investigation, and execution. It’s no coincidence that these are the requirements for success in just about any new venture.