California Civil Code Section 1632 is an often over-looked law that requires banks and lenders to provide contracts in the borrower’s native language. The law stipulates that any person engaged in a business that negotiates primarily in a language other than English – including in Spanish, Chinese, Tagalog, Vietnamese, Korean, etc. – either orally or in writing, must deliver a translation of the contracts or agreements to the borrower before they are executed. The translation must include every term and condition in the contract or agreement. The documents must be provided to the borrowers in advance of execution so that borrowers have time to review the material without the pressure of the pen in front of them. Put in place to protect people whose ‘financial literacy,’ or understanding of financial terminology, may be limited based on language and life experience, violation of this law seems to be at the heart of the mortgage crisis in California where over 12 million people speak a language other than English.
In the years leading up to the current mortgage crisis there were campaigns by low-income housing groups, Hispanic lawmakers, and others to increase homeownership among Latinos and other immigrant groups. Unfortunately for many of these people, the loan originators providing them with information about the loans did not comply with the terms of this law. Many of the people facing foreclosure today are there because they did not clearly understand what they were signing. They were explained the benefits of the loan in their native language but were not given the entire picture. Future adjustments to payments were glossed over. The concept that they might lose their equity was not explained. Few were given opportunity to review the documents in advance. Most signed documents that were not in their native language.
Other states have similar laws to protect non-English speaking borrowers. There are also several Federal laws that offer protection to the American consumer. Though the laws are somewhat broad in scope, they are designed to protect consumers from unfair lending practices, pursuant to the Federal Truth in Lending Act, as amended (15 U.S.C. Sec. 1601 et seq.). These laws give the victim the right to rescind the contract or agreement if the other party fails to comply with their provisions.
The combination of limited “financial literacy” and lenders and brokers eager to make a bigger profit deepened the problems in states such as California, Nevada and Florida where there are large numbers of immigrants. Though many of the borrowers facing foreclosure today have a legitimate defense against foreclosure actions, the vast majority are unaware that they have any rights in this matter. Unaware of the very laws that exists to protect their rights many will accept their fate and lose their home in the process. This is a serious problem that extends beyond the current crisis and one that real estate attorneys should pay attention to in today’s climate.
Sean Rutledge represents both plaintiffs and defendants in civil litigation with an emphasis on consumer protection and consumer rights as it pertains to real estate law. As the Managing Director at United Law Group, he manages the firms’ Manhattan and Irvine offices.
[tags]United Law Group, Sean Rutledge, real estate law, foreclosure, mortgage, California Civil Code 1632[/tags]
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