For the past three years, Fannie Mae and Freddie Mac have been working together to create a uniform loan application for residential mortgage originators that will give them the data they need in a manner that’s easier for them to process. The effort was the first attempt by the GSEs to alter the standard mortgage loan application in 20 years.
The new Uniform Residential Loan Application (URLA) was supposed to go into effect on February 1, 2020, with lenders having the option to begin using it in early July. But in June, the optional period was taken off the table. Earlier this month, the mandatory use deadline in February was also delayed.
According to media reports, the GSEs were directed by the Federal Housing Finance Agency to make changes to the new URLA form, which delayed implementation.
Changes taken off the table...for now
This will involve several changes that must now be made on the existing forms and the data model that the GSEs will use to process it. The changes FHFA required have to do with a few questions that some in the industry had challenged.
One result is that the Language Preference question and the Homeownership Education and Housing Counseling question will now be removed from the redesigned URLA form and included on a separate voluntary form.
According to the GSEs, the date for using the redesigned URLA is now moved to an unspecified timeframe in the future.
A question of language
One of the problems the Mortgage Bankers Association found with the updated URLA is the potential for future compliance problems stemming from the language preference question. As reported in HousingWire:
“As you recall, MBA opposed the inclusion of the language preference question in the URLA because of the customer relations issues the question would cause if lenders could not actually serve borrowers in their preferred language, and due to unresolved operational and legal questions raised by the language preference information,” MBA President and CEO Bob Broeksmit said in a letter to MBA members. “We greatly appreciate Director Mark Calabria’s willingness to revisit these concerns and resolve them effectively.”
Some have argued that with hundreds of languages in use in the world today, a consumer could specify a language that would make it impossible to serve the borrower. Could this be construed as a fair lending issue?
Still, changes are coming
Lenders should not assume that this delay means that the new URLA will not become a reality.
At Docutech, we have been helping lenders prepare for this change since the GSEs first revealed their newest versions of URLA on August 23, 2016. As part of that effort, we have been publishing various posts addressing different aspects of the URLA (and other documents associated with it), ranging from legal analysis to system support. All this material is available on our Compliance Blog.
Docutech also provided an overview of the URLA’s evolution and changes to Mortgage Compliance Magazine in July.
We will continue to monitor this situation, alerting our customers to changes as they occur.