There have been two significant developments in the mortgage documents business over the past couple months. On July 29th the Bureau of Consumer Financial Protection announced their proposed amendments to the Know Before You Owe rule, more commonly known as TRID. Shortly after, on August 23rd, Fannie Mae and Freddie Mac announced the release of their newly redesigned Uniform Residential Loan Application form (FNMA 1003/FHLMC 65). Let’s take a brief look at both of these important events.
Over the past year, since the implementation of TRID, the CFPB has spent a significant amount of time fielding questions from the mortgage industry about some of the more difficult and obscure portions of the Rule. In order to facilitate compliance with these problematic portions of the Rule, the CFPB promulgated these proposed amendments sanctioning some of their informal guidance given since the implementation of the Integrated Disclosures.
Although a number of the proposed changes to the TRID rule are for technical corrections and minor rearranging, there are several more significant adjustments to the Rule. Some of these major revisions include
- Changes to make it clear that the TRID rule covers cooperative units.
- Exclusion of the recording costs and transfer taxes from the 1% fee test used to determine exemption from the TRID rule for certain second lien loans.
- Multiple points of clarification for Construction loans.
- Instructions on the disclosure of packaged fees on the Settlement Service Provider list.
- Guidance on resetting tolerances with a revised Closing Disclosure.
- Direction on the use of principal curtailments.
- Changes to the Calculating Cash to Close sections and official commentary to make the calculations more consistent.
- Instructions for the proper use of the alternative forms for simultaneous second liens.
The CFPB is encouraging industry partners to comment on any portion of these changes, or on any other changes that they believe need to be made to the Rule. Comments must be received before October 18, 2016. Docutech will be submitting a comment letter to the CFPB. Any clients wishing to add their concerns about the proposed amendments to the Rule should contact the Docutech Legal department.
New Uniform Residential Loan Application
The Uniform Residential Loan Application has not seen a major revision in many years. With the release of the new Integrated Disclosures, and the increasing need to organize data for the URLA, FNMA and FHLMC coordinated a substantial modernization of the 1003 form. The central idea behind the revision was to modernize the 1003 in order to make it more compatible with current mortgage practices, underwriting needs, and recent regulations. The URLA revision can be split into three parts:
1) The look and feel of the document was updated to appear more modern, streamlined, and uncluttered, not unlike the new Integrated Disclosures. It has been split into sections that include the Borrower Information, Additional Borrower Information, Unmarried Borrower Addendum, Lender Loan Information, and the Continuation sheets. This was done to separate the information the borrower needs to provide from the information the lender needs to use for underwriting.
2) The URLA fields and options have been modified to allow for more flexibility and completeness. For example, the length of time the borrower has spent at their current and former address can be given in years and/or months, rather than just years as the current form allows. Other sections are new, like the Military Service section, and the new Homeownership Education and Housing Counseling section. The changes also gave an opportunity for the new URLA to incorporate the upcoming HMDA requirements into the 1003, which will necessitate the collection and reporting of more consumer demographic data.
3) The data points feeding into the URLA are being standardized and expanded with the Uniform Loan Application Dataset (ULAD), which assigns each data point an enumeration compatible with MISMO 3.4 standards. This will facilitate the collection and analysis of consistent data for the 1003.
Docutech has already completed an extensive preliminary review of the new Uniform Residential Loan Application changes, and is moving ahead with incorporating the necessary fields and configuration features. We have already begun to coordinate with partners to ensure a timely integration of the necessary URLA data points.