Monthly Archives: July 2019

The New URLA – Preparation Strategies

For the first time in nearly two de- I cades, major changes are coming to the Uniform Residential Loan Application (URLA) used in all agency and some non-agency residential loan transactions. Through a Fannie Mae and Freddie Mac initiative, this important document is being overhauled to im- prove efficiency, transparency, and cer- tainty in the mortgage process, and it is long overdue.

The new form will help move home lending deeper into the digital age. lt has a simpler, cleaner look and feel and provides better instructions for borrowers. Plus, it has new fields that reflect the current mortgage lending environment.

Additionally, there is a strategic advantage for lenders to use the new URLA. As more lenders go digital, they can use customer data to make marketing, sales, support, and operational decisions. The new URLA collects an abundance of new data that, with the right technology, can be harnessed to achieve strategic insights and gain competitive advantage in the marketplace, as well as quickly and efficiently process, underwrite, and deliver the loan to the secondary market or servicer.

All that being said, the new URLA is creating anxiety among lenders and for good reason. Change never comes easily, especially in an industry as complex and as highly regulated as the mortgage industry. Potential disruption from the new form could be similar to the TILA-RESPA Integrated Disclosure Rule (TRID), and there’s now less than a year to prepare. Fortunately, lenders can minimize the disruption by preparing now.


The biggest change to the updated application, aside from new elements and its appearance, is the way that information is reorganized. The current loan application was designed from a lender’s perspective and is very dense. The new, dynamic URLA is redesigned to be consumer-friendly and to look more like other disclosures. It was designed to enable prospective borrowers to complete more of the process by themselves, without a loan originator.

For example, the last time the form was significantly modified, there was no consideration given to email addresses and mobile phone numbers. The new form not only accounts for this information, it’s also dynamic. On traditional paper applications, there is limited space to list certain things like the borrower’s current and previous employers or the number of properties the borrower owns. The new form is dynamic, with expandable and collapsible sections. lt can accommodate all the information a borrower has to give while keeping relevant information in context as opposed to overflowing into separate pages.

Additional highlights of the new form include: Option for language preference Option for an “additional borrower” for those who might share assets or liabilities with the primary borrower Fields for rental or mortgage payments for current/prior residences Employment history income section Assets tied to the transaction (earnest money, sweat equity, employer assistance, etc.)

The Home Mortgage Disclosure Act (HMDA) requirements that went into effect in 2017 are also integrated into the new form, as well as details on veteran loan status, borrower credit counseling, and the relationship(s) between the borrower, additional borrowers, and other persons with interests in the property.


While changes in the new form are overwhelmingly positive, many of them will undoubtedly impact lenders. Every stage of the origination process will be affected. For this reason, when the optional use period will be reinstated and have made no changes to the mandatory use date of February 1, 2020. However, once the forms are integrated into automated underwriting systems, lenders should begin testing the updated application and updating any application plug ins. This will be a good time for training employees and familiarizing them with the new form and workflow. To successfully manage the transition, lenders should formulate implementation plans with clear goals and objectives, then execute against specific milestones. Plans should be designed to minimize disruption and coordinate changes across multiple vendor solutions. The overriding goal for lenders should be to prepare their organization, including training, testing, operations and technology, to manage a seamless transition to the new URLA with minimal business disruption.

The good news is that lenders have time to analyze their processes and identify potential the new form has the potential to be as disruptive, or even more disruptive, than TRID.

Consider this: Lenders’ websites that have built- in applications will need to be modified, as will all point-of-sale platforms. Pre-qualifications will need to change. And the impacts don’t stop once the loan closes, either. Data on closed loans will need to be provided to investors and integrated into servicing platforms.

Adoption will be a critical challenge for many lenders. Because it has become increasingly important for organizations to understand their data to run their businesses successfully, leveraging the new data fields in the form will be crucial. Another challenge will be maintaining ongoing compliance as the forms are being implemented and beyond. The impact to document tracking and investor delivery needs to be factored in, as well as the fact that the new URLA is a much larger digital document than its predecessor and requires extra storage space. There are changes to the lender’s loan origination system (LOS) and the customization of plugins to consider. And if they print Lender/Loan Information pages, they’ll need to decide whether the Loan ID, Universal Loan ID, or both should appear in the header of a printed document, and a host of similar decisions that sound minor but could have far-reaching consequences if not thought through.


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. Now is an excellent time for lenders to prepare for this transition. Lenders can start immediately by reviewing their operational procedures. For example, how will they handle loans that were originated with the old application but are still in the active pipeline when the new forms are implemented? This issue will be exacerbated on construction loans, given their lengthy lifecycle.

As of June 12, 2019, Fannie Mae and Freddie Mac announced the redesigned URLA will no longer be available for optional use starting July 1, 2019. At this time, they have not indicated if or problems before the final implementation date eight months from now. 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 and cleaner and provides better instructions for borrowers. That’s a step forward in powering the American dream of homeownership.

HMDA Changes On The Horizon

Proposed changes to the Home Mortgage Disclosure Act (HMDA) that would increase reporting exemptions on loan volume and other statistics present savings in cost and manpower hours for thousands of financial institutions.

Recent estimates suggest that banks collectively spend $270 billion in compliance-related costs or 10% of net operating costs, and the cost could more than double by 2022.

While everyone benefits from streamlined bureaucracy, this will be the third threshold change limiting the number of reporting institutions since the implementation of the 2015 HMDA Rule.

With continuous watering down of these regulations, banks run the risk of unintentionally impeding the Community Reinvestment Act. We stand to lose sight of the core mission of HMDA: To identify and address discrimination and ensure that economic incentives are focused on where they are most needed. Detailed data on home lending organized by census tract over the past 30 years has made these goals attainable. If we do not proceed cautiously, HMDA itself may become ineffective in its mandate, as the trickle of data it produces would be inconsequential.

Under the rule change proposed on May 2 by the Consumer Financial Protection Bureau (CFPB), now up for public comment, coverage thresholds and partial exemptions would be affected. For coverage thresholds the CFPB is proposing the following:

Increase the coverage threshold from 25 loans in the two preceding calendar years to either 50 or 100 for closed-end mortgage loans.

Extend to Jan. 1, 2022, the current temporary threshold of 500 open-end lines of credit and thereafter permanently set the threshold limit at 200 in each of the preceding two calendar years. As for partial exemptions, the rule includes amendments to the data compilation requirements and addresses interpretive issues relating to partial exceptions such as reporting after a merger or acquisition.

Under the current landscape of HMDA reporting, approximately 4,960 financial institutions are required to report closed-end mortgages and applications. Of those, 4,263 are depository institutions and approximately 697 are nondepository institutions.

Of those required to report, approximately 3,300 or 67% are partially exempt, and of 333 financial institutions are required to report open-end lines of credit of which none are partially exempt.

It’s important to consider the implications of the proposed threshold change.

If the reporting threshold for closed-end changes from 25 to 50, approximately 745 depository institutions—or 17%—would be relieved of HMDA reporting requirements. In addition, approximately 300 out of an estimated 74,000 total census tracts would lose at least 20% of HMDA reportable data.

Further, if the reporting threshold for closed-end loans changes from 25 to 100, approximately 1,682 depository institutions—or 39%—would be relieved of HMDA reporting requirements. In the end, around 1,100 out of an estimated 74,000 total census tracts would lose at least 20% of HMDA reportable data.

Although these changes have a small impact on the total number of records being reported, continuing to increase the reporting thresholds could have implications on the usefulness and reliability of HMDA, such as:

Less ability to use HMDA data to evaluate a depository institution’s performance under CRA Decreased insight to analyze access of credit at a neighborhood level to support targeted programs in underserved communities Impact of redlining analysis and comparing to peers
The reduced overall usefulness of reported data and questions about the output of HMDA data Deregulation of strict measures imposed after the 2008 financial crisis has helped banks and their customers boost the economy and increase confidence. But banks themselves should also recognize the benefit of continued reporting of HMDA statistics for the common good and the overall economy.


TRID Violations & Regulators Target List

The changes TRID brought to the industry, as we all know, was transformational, good or bad. From cradle to grave, we all had to make significant changes to processes and systems. Change management was put to the test with these changes.

How successful has your organization been in implementing TRID? What about continued compliance? Has your compliance management system continued to stand strong? Based on Federal Reserve System examiners, as noted in the first issue of the 2019 Consumer Compliance Outlook, common violations were noted. While you may have a few examinations under your belt for TRID requirements, it never hurts to review what regulators are finding that are important enough for them to document and communicate.

Make sure that general information on the Loan Estimate and Closing Disclosure is complete. Regulators look at this information because it’s important for borrowers to have the information at hand in the event that they have questions down the road. Errors or missing fields included:

Loan identification number Settlement agent File number Another important area is to ensure that closing costs and fees are clearly disclosed to borrowers. Fields in the Closing Cost Details table on the Loan Estimate and Closing Disclosure were found to be missing, such as disclosing the number of months for homeowner’s insurance to be paid, the person receiving payment for closing cost services, and funds disbursement for taxes to government entities.

It’s self-explanatory the need to have accurate calculations. It was also noted that violations were found on the Loan Estimate and Closing Disclosure regarding the Calculating Cash to Close table. Violations were observed concerning the omission of required contact information on the Closing Disclosure, page 5, for the lender, mortgage broker, consumer’s real estate broker, etc.

Regulators also noted that strong compliance management systems have certain elements in place that lend to the success of TRID compliance. Specially noted were the following:

Vendor management , Strong communication, Training and effective ,procedures, Secondary reviews , It’s no surprise that your focus is on preparing for the new URLA implementation. Also keep a close eye on TRID compliance.

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Around the Industry:

Happening Now

Recently, the FRB, FDIC, and OCC issued a joint press release that announced the availability of the 2019 list of distressed or underserved nonmetropolitan middle-income geographies where revitalization or stabilization activities are eligible to receive CRA consideration under the community development definition. The historical list of these geographies is available on the FFIEC’s Distressed and Underserved Tracts page.


How does your organization measure up to social media compliance? Check out this article from our June issue on guaranteed tips!


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