Jennifer Cagle: Mortgage Lenders Must Prepare For Upcoming URLA Changes


PERSON OF THE WEEK: Although government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac have postponed the deadline for mandatory use of the redesigned Uniform Residential Loan Application to an unspecified date, mortgage lenders must nonetheless be prepared for the rollout of the new form.

The GSEs announced nearly three years ago that they were developing a new application form to replace the current standard 1003 form – the first change for the form in more than 20 years.

The companies claim the redesigned form – which was originally slated to go into use on Feb. 1, 2020 – is better organized and thus improves navigation for users. This improved organization will support accurate data collection and better efficiency for a more consumer-friendly experience.

To learn more about how mortgage lenders are preparing for the official rollout of the new form – and what the implications are for business operations – MortgageOrb recently interviewed Jennifer Cagle, vice president – loan producer product development, at Financial Industry Computer Systems (FICS).

Q: How will the new URLA change current procedures and workflow for lenders? 

Cagle: The new URLA is designed to provide a more borrower-centric application that is easier for consumers to understand and complete. The new URLA divides the information collected into different documents to streamline who provides what data.

For example, now all borrowers must have their own applications. In the case of a joint application, there is a full borrower application as well as an additional borrower application for the joint applicant. In a separate lender information document, the lender provides additional information pertinent to the transaction that borrowers typically wouldn’t know.

Q: The GSEs recently postponed the optional and mandatory implementation dates to make modifications required by FHFA. While the dates for optional and mandatory use periods are still unknown, what do you think the biggest challenge will be regarding adoption and why? 

Cagle: One of the biggest challenges lenders will face is the change in procedures to collect information for joint applications on multiple documents instead of a single application form.   Lenders that have a borrower-facing Web application portal that connects directly with a backend LOS will have the advantage because the process will be somewhat automated for the lender. Therefore, there may be fewer procedural changes in the application-taking process. 

Q: In October, Fannie Mae and Freddie Mac published the new static URLA components. Are there any significant differences from the earlier versions of the URLA? 

Cagle: The changes primarily include moving the questions related to language preference, home ownership education and housing counseling to separate, voluntary forms. These changes will have minimal impact on loan origination software and borrower-facing Web applications.

From a process standpoint, lenders will need to consider how they can meet fair lending requirements and make the new application accessible to consumers with limited English proficiency. Lenders will have to create procedures for requesting the voluntary information while still adhering to fair lending demands. 

The dynamic version of the redesigned URLA has been retired. The GSEs will publish an interactive (fillable) PDF version of the redesigned URLA in early 2020.

Q: What are some of the overlooked procedural issues for lenders to be thinking through outside of just the change in the form itself?

Cagle: The most significant thing to consider from a procedural standpoint is the impact on the entire compliance process. Regulations such as Fair Lending, Equal Credit Opportunity Act (ECOA) and TILA-RESPA Integrated Disclosures (TRID) rely on the data collected in the application and set timelines that must be met for communicating with borrowers.

Although the redesigned URLA doesn’t change these regulations, they should be considered while creating a workflow and compliance process for staff. 

Compliance monitoring processes will need to be adjusted to include the new fields. Lenders may also want to revisit their reporting to make sure that the new fields continue to portray an accurate picture of the lender’s fair lending compliance.

Q: What are some things lenders can do now to prepare for the new URLA? 

Cagle: URLA has been a bit of a challenge due to the delayed implementation dates. Many lenders had rushed to ensure they were ready for the original deadlines and now must wait. In their joint announcement, Fannie Mae and Freddie Mac indicated that they are on track to announce the updated timeline before the end of 2019.     

In the meantime, lenders can make sure their compliance departments are up to speed on the redesigned URLA and ready to implement any necessary procedural changes. If lenders are well prepared when mandatory use begins, the transition will be easier for lenders and borrowers. 

Lenders should also begin training their frontline staff now, so they become familiar with the new application. Doing so gives lenders plenty of time to address questions and revise their application-completion processes as needed. Well-trained staff will be more efficient and ready to provide exceptional customer service to their borrowers. 

By taking the time now to adapt their processes to accommodate the redesigned application, lenders will be prepared for a smooth transition to the new URLA. 

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