The new URLA is coming – Is it a model application form?

Good morning from NAFCU’s spring Regulatory Compliance School! Sometimes a question from a member leaves me digging around in the Federal Register looking for more information. Where a rule or its commentary still leave you wondering what is required, those old preambles can provide clarity. It’s pretty satisfying when that actually happens. Other Federal Register dumpster dives are less illuminating but helpful anyway. Today’s blog covers one of these recent research efforts.

As credit unions who sell mortgage loans to Fannie Mae or Freddie Mac (the GSEs) are likely aware, there is a new Uniform Residential Loan Application (URLA) coming. For applications received on or after February 1, 2020, credit unions who sell loans to the GSEs will be required to use the new URLA. The GSEs are allowing lenders to start using the redesigned URLA as early as July 1, 2019. The URLA was updated in 2016 in anticipation of compliance with changes to Regulation C(HMDA) that require seeking specific race and ethnicity information from borrowers. However, these additional upcoming changes to the URLA are more significant.

Many credit unions use the URLA for mortgage loans even though they are not selling to the GSEs. Why is that? Likely because of Regulation B, where Appendix B to the rule has model application forms including the 2004 version of the URLA. Regulation B has some general rules against seeking information from credit applicants. Use of one of the model applications in Appendix B is generally considered to be in compliance with provisions in the rule that limit credit unions from asking for certain information. While there are some exceptions, there are general rules against:

 

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