New “URLA” (Loan Application) & Why It Matters; Compliance, Salability & Delays
Agents and brokers alike have been asking me about the new Uniform Residential Loan Application or “URLA” and how it might affect them and their clients.
This surprised me b/c I didn’t think agents paid that much attention to the mortgage side of the equation, but they should b/c these things definitely affect everyone.
In short, the new URLA is just the loan application form that Fannie Mae and Freddie Mac now require for every loan they buy or implicitly back.
And b/c Fannie and Freddie set the standard for the entire industry, everyone (mortgage banks, investors that buy mortgages, and jumbo lenders) have to follow suit.
A LOT MORE DATA
What the new URLA primarily does is request far more data – a total of 94 new data points to be exact (for a total of 236 fields now).
This additional data should hopefully give underwriters a clearer picture from the outset and therefore require fewer condition requests upon loan-approval – and that is a good thing.
The data, however, also subjects lenders to more risk and liabilities.
COMPLIANCE & SALABILITY
The new URLA is not saving any time for lenders now though b/c of the compliance risks – which is always the primary issue whenever Fannie, Freddie and/or regulators make major changes like this.
The last major change that sent ripples through the industry was in 2015 with TRID or the new closing disclosure documents that went into place.
The new URLA is not as major as the TRID changes, but every mortgage bank, point of sale/digital loan application vendor (like Blend), and loan origination software vendor (like Encompass/Ellie Mae) has been and is scrambling to make sure they are 100% compliant.
If a loan is not 100% compliant at the time of funding, a mortgage bank can have an unsalable loan, and the losses from such loans can be enormous (in the hundreds of thousands in some cases), as I mention often.
I should add that investors will not buy loans that are out of compliance b/c borrowers with non-compliant loans can sometimes get out of their obligation to repay the loan (something we all witnessed on occasion after the 2008 meltdown).
HOW THIS AFFECTS AGENTS – DELAYS
The new URLA’s effect on real estate agents will involve the occasional delay, as lenders continue to scramble to make sure everything is 100% compliant.
And given the complexity of the loan process and all of the software that needs to be updated, many unforeseeable issues won’t surface until the 11th hour of the mortgage approval process.
And this will simply result in delays of a day or two at most. But, like with TRID, this will all be ironed out over the next month or two.
HOW THIS AFFECTS BORROWERS – MORE TIME TO FILL OUT APPLICATION
Borrowers now have to answer even more questions when filling out loan applications.
But, with the advent of more and more powerful Point of Sale Systems, the loan application is getting easier to fill out digitally and that should offset some of the pain caused by the new URLA.
Founder/Broker | JVM Lending
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