Monday, May 3, 2021

Dear Old 1003, I'm sorry. I didn't know how good you were...

We have updated our Quality Control Data Validation checklist to conform to the organization of the redesigned URLA, which was required for use after 4/1/2021. 

Best Practice - Send for Signature, Not in Blank

The new Uniform Residential Loan Application (1003) form is required for SUBMISSION to Fannie Mae. It is NOT useful as a form to be sent to an applicant to collect information. In fact, there are areas in the form which explicitly state "TO BE COMPLETED BY LENDER" which belies the actual intent of the form. 

Send this document to your customer for completion at your own peril.  The reality is you will NOT send a blank application to the borrower to fill out. Instead, you should capture the information in your LOS, and send the completed form to the borrower for signature. If you want to put data collection responsibilities on the borrower, use the pre-application kit process. 

PROBLEM 1 - Too Complex, Too Long

That is the biggest problem with this product - asking a (single) applicant to parse THIRTEEN pages of application forms correctly, in most mortgage industry participants' experience - means it won't be returned. If it is, it will not be correct. 

Recommended Procedure - Only Sign in Final Form

For those of you who grew up with the old HUD-2900, you will remember that the HUD Application was only signed once the underwriter had approved the loan. This is the same approach. 

1.) Collect application data using LOS or Pre-Application Kit
2.) Enter information into LOS
3.) Generate form for signature

We are NOT advocates of having loan originators or consumers completing this form directly as it is extremely inefficient and fraught with problems, particularly since the representations and warrants on the application form are SO STRINGENT that sending out an application, other than the final verified application, is risky. Our recommended approach is to utilize the LOS screens to complete the form, and have the printed form reviewed by a senior processor or underwriter prior to release. 

The URLA is not necessary to begin an "application" as defined under other regulations

ECOA, TRID, and other regulations that are triggered by an "application" are not referring to this specific form. The regulations DO NOT require the use of the new URLA 1003 form to establish an application, so you can use any method you like to assemble the information (including obtaining a credit authorization). In fact, for AUS Data Submission, (DU/LP/Catalyst-TOTAL/GUS) the system is not calling for the form, simply the underlying data. Once the application is complete and ready for underwriting submission, you can send the compiled application. 

Our recommended process

1.) For customer facing data collection, use a pre-application kit or web form, with EDI to the LOS
2.) Download a re-configured data integrity review checklist aligned with the new 1003 here

Pre-Application Kit Sample

URLA Review Checklist Sample

Comment - Why all the fuss for a few small changes? Only several new fields added.

Once you dive down into the changes, you can see how minute they are. The new form doesn't add significantly to the collection of data and could have been added to the old form. 

For instance, the addition of a cell phone capture. Honestly, the cell phone could replace the Home Phone, which no one uses anymore. And since each co-borrower now has his or her own application, this actually represents the unique identifier of the loan. 

A litany of pre-filled choices... and then, still, "other"... drives me nuts. Simplification or obfuscation. 

Here is the updated URLA Policy and Procedure - depending on which module you review it goes in the following sections: