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URLA changes are coming. Are you ready?

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While the revised form becomes mandatory on all new loan applications taken on or after Feb. 1, 2020, automated underwriting systems are already being updated for the new forms, home lenders can start using it by July.

By Alla Eizenberg, Product Management, AI Foundry

Every day the mortgage industry generates more and more data and business processes are becoming increasingly complex, with the trend towards greater utilization of human resources, increased demand for faster mortgage approval cycle, and the growth of online customer-centric applications.

In fact, mortgage data is coming from many different sources including:

  • Point-of-sale systems (POS) that create customer engagement
  • Loan Origination Systems (LOS) that keep loan record data
  • Several, purpose-built 3rd Party Services
  • Government-sponsored enterprise Systems (GSEs)

The question for the industry is how do you collect, integrate, and seamlessly exchange data from so many different types of users? To facilitate data exchange across different platforms and different business models, The Mortgage Industry Standards Maintenance Organization (MISMO) developed several standards for exchanging information and conducting business in the U.S. mortgage finance industry.

MISMO standards are accepted and deployed by almost every entity involved in creating or regulating mortgages in the United States, including banks, credit unions, mortgage lenders, Fannie Mae, Freddie Mac, Ginnie Mae, the Federal Housing Administration and the Consumer Financial Protection Bureau, in addition to settlement services providers, real estate appraisers and other third parties.

For the first time in more than 20 years, GSE vendors, Fannie Mae and Freddie Mac have redesigned the Uniform Residential Loan Application (URLA – Fannie Form 1003/Freddie Form 67) to make it simpler to use and to add new data fields for increased compliance reporting and reflect today’s mortgage lending business.

The updating of the form is part of the GSEs’ Uniform Mortgage Data Program (UMDP), a larger joint initiative under the direction of the Federal Housing Finance Agency (FHFA), to standardize loan data used for underwriting single-family mortgages in the U.S.

The layout and information on the new forms will require LOS & POS system upgrades. There is more information, and it’s in a brand-new format - each data point must also be mapped to meet the MISMO3.4 coding for the required electronic reporting of all of the data to the agencies. One change that may require some additional effort is the required use of a separate form for each applicant when multiple applicants are involved. This will require the capability to gather the information for each applicant while combining or aggregating common data and separating other information that is unique to each applicant.

AI Foundry proactively reviewed changes needed to extract and process the data that will be captured by lenders in the new form 1003 loan application

  • As result, AI Foundry developed MISMO3.4 compliant data schema for out-of-the box integrations with POS/LOS systems.
  • The information gathered and entered the new URLA will be validated and compared with other loan documentation to ensure it is more accurate.
  • Our software robots will help lenders to automatically analyze loan application data to better identify weaknesses in the process or information gathering that could lead to loan compliance issues.

While the revised form becomes mandatory on all new loan applications taken on or after Feb. 1, 2020, automated underwriting systems are already being updated for the new forms. The GSEs want technology vendors to begin testing the new form by the first quarter of 2019, so that home lenders can start using it by July.

While there may be challenges ahead, the changes upon us are very positive as we make progress in this ever-evolving age of the digital mortgage. Ultimately the new URLA is simpler, cleaner and provides better instructions for borrowers, and that’s a step forward in powering the American Dream of home ownership.

We would welcome the opportunity to discuss this with you further and how we can work with your organization to be prepared for the new 1003.

Check out these additional resources:

Ellie Mae:  https://www.elliemae.com/blog/compliance/are-you-ready-for-the-new-urla

Fannie Mae: https://www.fanniemae.com/content/faq/urla-ulad-faqs.pdf

Freddie Mac: http://www.freddiemac.com/singlefamily/sell/uniform_mortgage_faq.html

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