New Home Loan Application Coming

Preview of the Uniform Residential Loan Application Redesign

New Home Loan Application Coming
May 30, 2017

It's rare for financial forms to last twenty years virtually unchanged. The Uniform Residential Loan Application (URLA), otherwise known as Form 1003 or Form 65, is a notable exception. For two decades, it has served as the industry standard form used by lenders to evaluate borrowers seeking mortgage loans.

That is about to change with the new URLA published by Fannie Mae and Freddie Mac in August of 2016. The August release was intended to allow those in the mortgage loan industry time to establish a transition plan for the new form, supporting systems such as the Uniform Loan Application Dataset (ULAD), and corresponding changes in automated underwriting systems (AUS).

The changes were driven in part by increased reporting requirements under the Home Mortgage Disclosure Act (HMDA). As a means of ensuring that discrimination does not take place in lending practices, the new URLA is designed to collect more information about gender, race, and ethnicity (primarily through subcategories of race and ethnicity) and maintain the data in a more usable form through the ULAD.

In addition, the new URLA is expected to be more consumer-friendly by making the format similar to the redesigned Loan Estimate and Closing Disclosure forms required during the home buying process. By making the form clearer and easier for borrowers to understand, the new URLA is intended to gather more accurate and detailed information in order to allow lenders to better assess risk.

The current form and the new form still contain the basic information lenders require — employment and income status, assets and liabilities, purpose of the loan and information about the property in question, and information on other real estate holdings — but the new form provides improved organization and structure.

At the moment, there is still no firm date on when the new form takes effect. The original release of the redesigned URLA contained the phrase "Effective 1/2018." The form was revised shortly thereafter to say "Not for Current Use" because the Consumer Financial Protection Bureau (CFPB) announced that lenders would be allowed to use the new form as of January 1, 2017 if they choose to do so. This product of the CFPB "safe harbor" review of the redesigned URLA gives lenders time to work out any issues with the implementation of the form using direct experience.

Fannie Mae and Freddie Mac have not yet determined a true date when the URLA form will be mandated. A November 2016 release by Freddie Mac states, "Our goal is to provide lenders with more precise information by mid-2017 regarding when the URLA and our AUS specifications will be mandated."

Even if the form is not mandated by January 1, 2018, the expanded data on race and ethnicity is to be collected by January 1, 2018 per the mandate of the HMDA — so it seems likely that the form will be mandated by that date as well.

If you plan to apply for a mortgage loan in the near future, it may be helpful to look over both forms and compare the two. Even if your lender uses the current version of the ULRA, looking over the new version may help you to understand some of the more confusing aspects of the original form — and when it comes to a mortgage application, it is always best to minimize confusion.

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