Plain Language
at Work Newsletter
  23 October 2008—Number 38  

Smart Language: Readers,  Readability, and the Grading of Text

Unlocking Language: The Classic Readability Studies

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The Legal Writer

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Clarity for Lawyers by Mark Adler

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Irish Voters Sink Treaty of Lisbon

Another EU Shipwreck

WOULDN'T you know it: the Treaty of Lisbon—the latest attempt at European unification—was blown out of the water, this time by Irish voters.

Before the vote took place in June, European Commissioner Charlie McCreevy told voters that "no sane or

Insanity too harsh a term? Complexity has big political consequences. Illustration: The Economist.
sensible persons" would read its full text. Evidently, the Irish agreed. A post-referendum survey of the voters revealed that even 82 percent of the voters who voted for the treaty did not understand it.

Regarding McCreevy's remark, Britain's Economist magazine stated:

Insanity is a harsh term, but you would not want a dinner-party guest who reads European Union treaties for fun. Much of the EU's business may be important, but it is baffling to outsiders—and very dull. People in Brussels rarely admit this, but the off-putting complexity of the EU has big political consequences.

Putting Off Voters

When we last visited the European Union in June 2005, voters of the Netherlands and France had just rejected the European Constitution. We described that document as a "bloated and botched" affair of 855 pages written at a difficult 16th-grade level.

After a decent "period of reflection," the EU diplomats re-assembled

German Chancellor Merkel at the Lisbon signing: attempting an end-run around voters.
in 2007 in Lisbon, this time to replace the rejected constitution with a treaty. Its purpose was to complete the unification process begun with the Treaty of Amsterdam (1997) and the Treaty of Nice (2001).

The Treaty of Lisbon, which emerged from that conference, was signed in December. It is a 272-page document written at the 19th-grade level. Combined with the two previous treaties on which it builds, it ends up with more than 800 pages of impenetrable text. By re-casting the same material as a treaty instead of a constitution, the framers were attempting to avoid a voter's referendum.

Ratification required unanimous approval of all 27 countries in the EU. The treaty sailed briskly through the parliaments of 24 countries but slammed into the voters' referendum mandated by the Irish Constitution.

Who is the Audience of Treaties?

Stunned by the Irish vote, EU officials admit that they failed to properly explain the 800-page treaty to Irish voters. They have formed a new plan to re-educate Irish voters. Meanwhile, anti-treaty campaigners have insisted that the referendum cannot be re-run and that "No means no."

The collision brings up an important question: Do treaties have to be in language understood by voters, and, in particular, this treaty? The Economist answered:

The answer must surely be yes. The EU is no longer just a free-trade zone. With the advent of things like EU immigration policies, or extraditions without appeal within the union (via the Euopean arrest warrant), the EU now touches the essential contract between the citizen and the state.

We would go further: all treaties touch the essential contract between the citizen and the state. Treaties are the highest laws of the land. All citizens are bound by them and have the right to read them in language they understand.

Mortgage-Loan Disclosures

In the Eye of the Storm

JUST AS Hurricane Ike rolling into Galveston was energized by the warm waters of the ocean, the storm battering the world's economy has been energized by millions of foreclosures, one in every 200 homes, 250,000 a month.

At the root of many foreclosures are

The real-estate closing. the buyer faces a mountain of forms unintelligible to the average reader.
faulty mortgage-disclosure forms. Regulations require these forms to tell home buyers about the costs and risks of loans. Lenders often fail to provide them. They rarely take time to see if borrowers understand them.

A Freddie Mac/Roper poll showed that six out of ten homeowners did not fully understand the terms of the mortgage. The same number was unaware of the services their lender offers those in trouble.

A Mountain of Paperwork

In 1977, banks and lenders in the U.S. were pressured by Congress and the Community Reinvestment Act to extend credit to low and moderate-income neighborhoods "consistent with safe and sound operations."

As a result of higher-risk loans and new types of loans, the paperwork became incomprehensible. Before 1977, a real-estate transaction in the U.S. was concluded with contracts that filled four or five pages. Today, closing files are from two to four inches thick and have a hundred or more pages.

In California, for example, there are 50 to 75 disclosure forms, which the buyer has to read, understand, and sign. Written at the 12th-grade level and up, average adult readers in the U.S. find them impossible to read. They often sign without reading or understanding, jeopardizing consent, the integrity of the contract, and the success of the loan.

It is up to the good will of the loan officer to fully explain the terms of the loan and the loan process. Because the firm originating the loan can turn around and sell the loan for a fee to an investment company, neither the firm nor the loan officer have any incentive to educate the borrower. Instead, they effect the loan as quickly as possible with the least effort. Most will have no further contact with the borrower or the loan.

Housing and Urban Development (HUD) Requirements

In 1968, the U.S. Congress passed the Truth in Lending Act, which covered disclosures and rescission (the right to cancel a contract). In 1974, the U.S. Congress first passed the Real Estate Settlement Act in order to help buyers shop for loan services. The Act also outlawed kickbacks and referral fees.

One provision of the law requires loan brokers to give the prospective borrower a so-called Good Faith Estimate within three days of applying for a loan. California has a similar Mortgage Loan Disclosure Form for subprime loans. The purpose of these documents is to highlight the main features of a proposed loan.

The problem with these estimates is that there is no requirement that the rates and fees will be the same on the final statement of the loan. Many buyers mistakenly assume they are the final costs.

The law also requires lenders to provide the borrowers at the time of the settlement with a copy of the HUD-1 Mortgage Service Dislcosure Statement describing the final settlement costs and fees and a Special Information Booklet, explaining settlement process and the HUD-1 disclosure form.

There are several problems with these documents:

  • Critical information is omitted, such as the three-day cancellation right, the lender's right of foreclosure, and the probability of defaulting (which lenders usually know from actuarial formulas).
  • There are no penalties for not giving the disclosure documents to the borrower other than what bank regulators decide.
  • There are no penalties for not giving the borrower a copy of the Good Faith Estimate take home and study.
  • There is no requirement to assess how well the borrower understands the forms, the mortgage, or the foreclosure.
  • The disclosures do not inform borrowers about their rights in disputes to file complaints with regulatory agencies and to sue mortgage brokers for questionable and fraudlent activities.

Urgent Remedies

The enormity of the current crisis brings mortgages into question. As a device to secure a loan, a mortgage gives the lender the right to foreclose—sell the house in case of a default.

Like the debtors' prisons of old, foreclosures often punish those who have committed no wrong. They dispossess those who have often invested all they have in closing fees, equity, interest, taxes,

Experts agree: the cause is ignorance.
furnishings, landscaping, maintenance, and relationships with the community. They are also a constant source of fraud and scams among those who prey on the unfortunate. They mock the dream of home ownership as a reward for probity and hard work.

Many experts agree that the basic cause of foreclosures—and this crisis—is the consumer's lack of information. The government can put more teeth into the disclosures. The mortgage and real-estate industries can strengthen the disclosure process with information that is understood and readable. They can also increase efforts to educate the public about the realities of mortgage loans.

One lender suggests requiring everyone who wants to buy a home to obtain a Certificate of Mortgage Understanding before they can sign for a loan document. Have the mortgage industry and a state licensing commission approve and offer the Certificate at low cost to the applicants.

Also important is the need to simplify and reduce the number of forms, which are unintelligible to the average reader. If there is any financial transaction that must be clear and transparent to all parties, it is the purchase of a home. It is often the largest purchase of one's life.

The success of the free market depends on both buyers and sellers being fully informed. The credit meltdown is an object lesson in what happens when this does not take place.

Plain Language in the News

The language of business schools:

The jargon of city councils:

Put prospectuses in plain English:

It's time for plain English best practice:

SEC plans plain-English financial data:

Government Web sites win awards for difficult language:

Bankers and insurers want to eliminate jargon:

Readability of Colorado Voters' Guide:

Silent epidemic of health illiteracy:

The plain-language movement:

Tougher consumer protections needed:

Impact-Information Plain Language Services
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