Do Your Borrowers Know Their Data is Verified?
As the mortgage industry prepares for the “new” version of the Uniform Residential Loan Application (URLA), an important question arises – will the borrower be made more aware of the quality control verification process? Historically conducted on a ten percent random sample and loans that default, the recent Federal Housing Finance Agency (FHFA) announcement advises Fannie Mae and Freddie Mac to move the focus of QC reviews to an earlier point in the process. Conducting post-closing and pre-funding reviews within 30 to 120 days of loan purchase is the suggested FHFA model. Although the focus of the new URLA is on data, which brings significant lift to the verification process, there will obviously be some gaps in data availability for certain employment, income and asset scenarios. This predicament is similar to the inconsistencies in electronic property data that occurs in more rural geographic locations. These circumstances will force lenders and other loan participants to collect information the “old-fashioned” way, by mailing to and/or calling small employers, businesses and/or community banks to verify corresponding application information
The current URLA, Fannie Mae Form 1003, Freddie Mac Form 65 7/05 (rev. 6/09) contains specific language informing the borrower that the information provided in the application may be verified. This falls under section IX. Acknowledgement and Agreement and is called out at the end of this section under Acknowledgement. The new URLA is not as specific under section 6: Acknowledgements and Agreements. The premise for this change is that the new format is intended to separate out information that the borrower acknowledges from information that will be verified by the lender, assuming the latter is obtained through data collection.
These are great practices and show significant strides in the mortgage industry overall, but again where does this leave the borrower when they realize their private information is being checked by companies they’ve never heard of. This is a touchy situation for both the consumer and the QC provider. Imagine the first-time borrower’s concerns as they’ve just completed what can be an emotional and invasive transaction, and now someone is double-checking their personal information. Data verification will absolutely minimize this possibility, but will not eliminate it. The verification process is not always discussed in detail during the application process. With more generalized narrative about the QC and verification process, automating the URLA could further impact borrower concerns when they realize their application data is being verified. In recent feedback gathered by QMS from the lender community, this was a primary concern and frequently placed the QC provider in the role of complaint manager.
For lenders that are serious about consumer education and protection, this is an area that requires consideration. Attention to borrower awareness as the new URLA is introduced, and with the possibility of increased QC reviews, is a necessity. Now more than ever lenders should engage QC providers that understand the importance of customer experience and aren’t just checking the checkbox. QMS is the mortgage quality control and audit technology solutions company. Stay abreast of changing QC requirements and make certain your team is positioned to handle URLA changes, as well as conduct expanded QC reviews, with QMS. Offering post-closing and pre-funding audits as a core product solution for over 20 years, QMS is ready to meet changing QC review and verification requirements today.