7 unexpected benefits of the new Uniform Residential Loan Application
The government-sponsored enterprises Fannie Mae and Freddie Mac worked together to develop a completely redesigned Uniform Residential Loan Application (URLA) in an effort to support industry changes and meet evolving customer expectations.
Though the GSEs originally planned to begin accepting new mortgage applications with the redesigned URLA July 1, 2019, that date has been postponed. Lenders can take advantage of this time to prepare for the impending updates.
It may sound intimidating, but the new URLA actually provides many benefits for lenders and borrowers alike. The transition to the updated form will necessitate work from lenders, but the benefits of the modernized system will make it worth the effort.
Here are seven unexpected benefits of the new URLA:
1. A borrower-centric user experience
While the old URLA was developed from the perspective of lenders, the rules that define the new URLA are written with borrowers in mind, making it easier to develop an intuitive online experience. The redesigned URLA acknowledges modern design principles for enhanced readability and ease of use. Each field is formatted for clarity and purpose.
Fields are dynamic and extendable based on the information provided by borrowers. As customers complete the form, fields will contract when satisfied and expand when there’s a need for additional information. This level of adaptability allows software vendors to streamline the static user experience of a physical form, making it a dynamic and fluid digital process.
2. Consistent labels and simplified organization of fields for enhanced transparency
The new URLA design is simpler and more consistent than its predecessor. Fields are organized so that borrowers can fill out related fields in logical order. This will help customers complete the application faster and with less need to consult with their loan officer throughout the process.
Likewise, the acknowledgements and agreements section has been redesigned with clear, simple language that explains necessary details in an intuitive manner. This transparent language will make it easier for borrowers to understand what’s required of them, reducing the need to reach out to a loan officer.
3. Straightforward instructions for borrower self-service
Today, consumers use their desktop and mobile devices to purchase vehicles, do their taxes, obtain insurance and conduct their personal banking. As a result, borrowers expect a modern and efficient lending experience. Lenders should allow the borrower to complete the application on their time, offering assistance as they need it.
The new URLA acknowledges this evolving need by providing clear and succinct instructions at the beginning of each section. These directions make it effortless for borrowers to find the application and start to fill it out immediately, without the need for communication with a loan officer. Digital lending platform vendors can extend this benefit by including quick access to secure chat, phone and email options for when borrowers do require extra assistance.
4. Well-defined separation of borrower and lender information
The updated URLA creates a definite separation between borrower and lender information. In fact, the new URLA form 1003 can be thought of as two distinct sections that make up one complete application. Digital lending platform vendors can improve the experience further by organizing the sections based on real utilization trends, as well as tailoring UX elements based on specific lender requirements.
The borrower information section includes:
Financial information - assets and liabilities
Financial information - real estate
Loan and property information
Acknowledgements and agreements
Loan originator information
The lender loan information section includes:
Property and loan information
Mortgage loan information
Qualifying the borrower
Homeownership education and home counseling
This separation erases any confusion borrowers might have about the sections of the application for which they are responsible. Plus, this allows borrowers to complete their sections anytime, even outside of normal business hours.
5. Easy separation of individual borrower applications within a single loan package
The new URLA makes it easy for more than one borrower to apply for a loan. Rather than submit redundant data, borrowers with joint financial information can provide a signature or digital consent to indicate that the additional borrowers have the same information.
If multiple borrowers have disparate financial information, they can each fill out separate fields. These applications can be easily packaged and submitted simultaneously or asynchronously, depending on borrower preferences.
6. New and updated fields to reflect modern borrowers
A lot has changed about the world since the last time the URLA was updated. This time, significant effort has been made to modernize the form. For example, the URLA finally contains a field for email addresses, something that has been absent in previous iterations. Meanwhile, obsolete fields, such as those asking for the make and model of the borrower’s vehicle, have been removed.
The new form also recognizes the rise of the “gig economy” by providing space for multiple past and current employers. Additionally, borrowers can note their language preference, though the form notes that the transaction is likely to be conducted in English.
Other additions include fields to determine the type of loans obtained by veterans, a section on credit counseling and an addendum for unmarried borrowers.
7. Inclusion of 2018 HMDA demographic data for easy compliance
Implemented in January 2018, the Home Mortgage Disclosure Act requires lenders to collect the demographic information of borrowers. Currently, lenders must use a separate addendum to gather the information.
The redesigned 1003 form has this section built into it. Note that borrowers can choose to fill out all, part or none of this information. If the form is collected in person, lenders may be required to note whether or not demographic data was collected based on visual observation or the borrower’s surname.
Now that you have a better understanding of what benefits you can expect from the new URLA, it’s time to think about how you’ll update your internal and consumer-facing process. A rushed implementation that focuses on compliance alone could leave your customers feeling dissatisfied. If you are looking at external vendors, be sure to only consider those that take a thoughtful approach to implementing URLA requirements to create a best-in-class user experience.