‘Getting to the future means putting the past behind us’ was the title of a recent article by Mark Fleming in Mortgage Banking magazine. The article was about homeownership, but I realized that this title would be the perfect lead-in to this article.
On December 8, 2015, the GSEs announced future updates to the URLA with three objectives:
- Update the URLA to collect information that is relevant and useful to the industry.
- Redesign the format and layout of the URLA to make it more consumer-friendly.
- Define a MISMO compliant dataset (ULAD) that supports the URLA.
To improve their underwriting engine’s capability to scrutinize and approve loans, the GSEs identified a significant number of additional data elements needed from both the consumer and the lender. I will start with an assessment of the Uniform Loan Application Dataset (ULAD). I agree wholeheartedly with this focus on the data. The effort to add or modify data elements to this MISMO structure in the future will be relatively painless.
As we know, the industry recognized the importance of standardizing the exchange of mortgage loan information and gave life to this vision with MISMO. Its work has been well documented and is being accepted by multiple segments within the industry; we do not need to spend more time here justifying its mission. The objectives set forth for the ULAD are consistent with the objectives of MISMO.
What I am concerned about is the creation of a new URLA form in concert with the development of the ULAD. So, why should that be a concern?
Given that there has not been a major revision to the form in over 20 years, it is certainly legitimate to consider that it may be time to do so now. There are other factors to consider, however, beyond the age of the form’s current version. What is the fundamental value of a form—well-designed or otherwise—for collecting data when the majority of its information will be collected electronically? Why not let the loan origination systems determine how to organize the collection of data for the ULAD? They can control the sequence and presentation of data collection based on loan parameters.
We are living in an electronic, online world. The lines of distinction that divide computers, tablets, and phones are becoming blurred as they get closer to each other in size, speed, and capacity. It is easy to envision a future where lenders will not require consumers to manually fill out applications. Quicken Loans is providing leading-edge evidence of this today with its Rocket Mortgage product.
One of the GSEs’ requirements is to produce a final loan application for the borrower(s) to sign and attest to at closing. My question is why this has to be a replication of a paper-based form rather than a report generated by the LOS that keeps all the related data sections together. Another concern about a new URLA is its maintenance. Unexpected changes could quickly make a revised URLA obsolete, whereas the electronic upkeep of the ULAD lends itself to easier modification.
Remember: ‘Getting to the future means putting the past behind us’. As I recall, the original 1003 loan application was a single, front and back, legal-sized sheet. The earliest version of the 1003 that I can locate is 4 pages, dated 10/92. The form has been modified a few times since then, with the latest dated 7/05 with a revision on 6/09. However, the general flow and layout has not significantly changed from the original 1003. In fact, in the beginning most loan origination systems were intentionally designed to strictly follow the flow of the paper loan application. Many of these systems still function in this fashion today. This fact alone may explain why the form was only occasionally updated.
First, let’s discuss the use of forms in general, and the 1003 in particular, for collecting information. A form is simply a document with labels and blank spaces, which are placeholders for filling in data. The primary purpose of the design and layout for any form is to maximize the amount of valid data collected in relation to its physical space. Good form design is very structured and is formatted to present data collection in a logical order to ensure that all the relevant information is gathered. The use of check boxes and radio buttons is intended for user convenience and helps to minimize errors. It is not uncommon to find that the physical space allotted for data entry is insufficient for the information requested. For example, in the current URLA the space for the borrower’s address is approximately three and half inches wide and a quarter inch high. You better have a short address and very small printing.
Next, let’s look at the effort of producing the URLA as an output document. This has all the constraints of placing data in the appropriate places on a static template with all the overflow data on the blank page(s). The problem is that there is no structure or format for the information that might be included on the continuation page.
At September’s MISMO Summit meeting the GSEs presented different mockups of part the URLA first page, showing different structure and flow along with some font examples. The feedback to the GSEs was that we needed to look at the overall substance of the form before commenting on its style. At the January MISMO meeting the GSEs did a high level overview of some sections of the form. My observations showed nine pages, with some significant changes in the sequence of sections and information within some of the sections. The GSEs stated they wanted to modernize the form, but didn’t want the form to dictate the process. For many, the process was already defined to follow the form flow. We will have to wait to determine the impact since the new URLA was not fully available for distribution at that time.
Personally, I don’t care if they create a new version of the URLA for the 5% of those applications that are submitted on paper. It is my hope, though, that allowances are made to accommodate the industry’s knowledge in this area. We need to allow the industry to determine the best way to collect the required information and allow some flexibility in the output for the borrower(s) attestation signature.
It’s time to change! For far too long, the mortgage loan process has been focused on documents. The main focus should be on the ULAD.
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