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August 5, 2021

A Federal Home Finance Agency-approved Uniform Residential Loan Application (URLA) is an amalgamated document designed for lenders who sell a closed loan to either the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). With URLA, the lending industry moves further toward mass personalization of the loan origination process. URLA is an advanced version that asks for additive information from borrowers, excluded in the previous versions – a change that has been noticed for the first time in 20 years. Lenders and brokers must use the new URLA form for all new loan applications effective from March 1st, 2021; Desktop Underwriter® and Desktop Originator® will accept the same and the updated DU MISMO 3.4 file formats from May 1st, 2021. The thought behind the restructuring of URLA is to have more buyer-friendly loan application processes.

Benefits for borrowers and lenders

The revised Form 1003 promises to offer borrowers and lenders essential advantages:

  • Provides consumers clear instructions to lay a strong foundation for initiating the process.

  • Simplifies consumer navigation for completing the form while providing additional information for lenders to underwrite the loan.

  • Offers a new application that separates the fields for borrower and lender information. Additionally, Fannie Mae has given a digital platform that provides end users the option to filter sections and generate a tailor-made experience.

  • Allows lenders to capture and relate data of different borrowers effortlessly.

The promise of AI or machine learning (ML) towards a paradigm shift in the lending industry is now starting to open. Many key players across the buyer-lending dividing lines are already enforcing the technology for process streamlining, productivity improvement, effectiveness, customer experience enhancement, risk alignment, and better loan quality. Lending by itself may be a data-rich environment, and therefore the benefits are there for everybody to ascertain.

The supporting loan application submission file that is based on the Automated Underwriting System specifications helps to incorporate a digital workflow. The new URLA form is much longer than the previous one and has 94 new checkpoints, requiring lenders to gain more information on the borrowers than earlier. It has excluded a few outdated fields like details of borrowers’ cars (make and model), year of schooling, etc. Instead, it has added new fields like borrowers’ mobile numbers, e-mail IDs, housing expenses, military service history, additional demographic information, etc. With the new URLA form, lenders and real estate brokers can reduce the iterations for documentation as loan officers and loan processors get better visibility of the borrowers. Subsequently, they can inform the borrowers to provide the relevant information and documentation, which would help proceed through the mortgage approval process faster.

Strengthening lender’s performance through digital adoption

Most lenders also believe that digital processes and advanced analytics would help with better decision-making. The consumer experience standards also contribute to a significant move towards digital adoption. Combining efficient loan originating systems with appropriate digital solutions and implementing Robotic Process Automation, API integrations, and processes will help lenders achieve greater output by reducing the overall cycle time.

Looking ahead

The new URLA is bound to improve the experience of the borrower as well as help in enhancing the speed of the lender’s origination process. Overall, a fresh look and feel makes it easier for both lenders and borrowers to navigate the application. In the coming months, the additional information provided by the new URLA document will allow the development of several AI and ML tools. Down the lane, we can expect to see AI and ML become a regular component in the end-to-end borrower journey from buying homes to possession of the properties.

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Bhavik Thakkar specializes in mortgage and capital markets and has over seven years of experience in post-cloning, document sorting, and Home Mortgage Disclosure Act processes. He completed his Master’s in Business Administration in finance from Pune University.

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