Industry delivers mixed response to new Fannie, Freddie mortgage application

Will it speed up or slow down process?

Fannie Mae and Freddie Mac today announced a redesigned Uniform Residential Loan Application, the standardized form used by borrowers to apply for a mortgage loan.

In addition to the new Uniform Residential Loan Application, there is also a separate form called the Lender Loan Information form.

The industry’s response to the new forms is varied.  While some are very excited about the new changes, others expressed only concern.

The new flow will make the form easier to understand for consumers and a quicker process for lenders, said Frank Fuentes, New American Funding vice president of multicultural community lending, who was part of a focus group who gave feedback on the new changes for the Hispanic version of the new form.

Fuentes said he didn’t foresee any major setbacks to lenders adopting the new form, and that it is a step in the right direction.

Loan origination software companies may have to work more on adopting to the new changes, but if these companies embrace it, the rest will be seamless, Fuentes said.

"The publication today of the redesigned Uniform Residential Loan Application represents a significant step in a multi-year effort to update, standardize and enhance the quality of loan information for underwriting single-family mortgages,” said Melvin Watt, Federal Housing Finance Agency director.

Not everyone, however, is as optimistic about the new changes.

“With every new form that comes out, we aren’t moving in any other direction than greater complexity,” Mortgage Bankers Association CEO David Stevens said.

Unlike Fuentes, who thinks the new form will speed up the process, Stevens said the new, 7-page loan application along with its accompanying forms could even delay the loan process.

“I’m not quite sure what they’re solving by all this,” Stevens said. “Hopefully it doesn’t needlessly slow down what’s already a very paperwork-heavy process.”

Stevens is concerned the addition of the Lender Loan Information form will slow down the process and unnecessarily add more paperwork.

The new form also includes a section about demographics where the lender fills in not only what gender, race and ethnicity the borrower is, but also how they got the information.

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This part of the form asks the lender if they determined the gender, race and ethnicity were determined by visual observation or surname.

“I’m not sure what the point is of those questions,” Stevens said. “Are they asking us to decide based on observation?”

Others in the industry thought the changes would affect very little, and said the change wasn't significant. 

“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. 

Stevens stressed that the current 10-03 form worked well for decades, and that the MBA would study the new forms carefully to send its feedback to the FHFA. 

Fuentes, on the other hand, said this step will ease the process for the industry as it becomes easier to understand for both lenders and consumers.

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