Moody’s: New GSE mortgage application positive for mortgage bonds
"Will lead to stronger loans"
Despite some disagreement in the industry, the recently announced redesigned Uniform Residential Loan Application, the standardized form used by borrowers to apply for a mortgage, should be a strong benefit to the industry, according to a comment report from Moody’s Investors Service.
The changes will allow lenders to deliver an easier, more consumer-friendly loan application experience.
Although the new form doesn’t take effect until Jan. 1, 2018, Moody’s stated, “The additions to the form will increase the granularity and accuracy of the data that the GSEs collect, which will allow them to refine their automated underwriting models to better differentiate credit risk.”
“This likely will lead to stronger loans originated using the GSEs’ automated underwriting systems and will be credit positive for future residential mortgage-backed securities backed by conforming loans,” it continued.
The Moody’s report highlighted that the form provides the GSEs with more detailed information electronically and allows them to improve credit analysis by linking various borrower characteristics to loan performance.
In addition, Moody’s explained that the standardized definitions of data fields will reduce the GSEs’ reliance on lenders to ensure that the data are correctly defined. The form also will help ensure accuracy in areas where borrowers were previously likely to make assumptions that were inconsistent with the GSEs’ definitions.
Some of the key changes to the form include how gifts and grants, income type, borrowers assets and self-employment/business ownership are identified.
To view the entire form, click here.
After the news came out, HousingWire talked to several industry experts to see how it would impact the industry. However, response to the new forms is varied.
Since the form doesn’t take effect for more than a year, it is too soon to see the impact. But some in the industry are optimistic on it.
“We don’t see this change having a huge impact in the mortgage industry,” said Jason Miller, Guaranteed Rate vice president of software development.
“While the new application is redesigned, has updated requirements and clear instructions, most lenders require the same items as Fannie Mae and Freddie Mac,” Miller said.