Beginning January 1, 2018, Fannie Mae and Freddie Mac will require lenders to use a new Uniform Residential Loan Application (URLA) when they originate mortgages secured by a single family residence (SFR). The new URLA will also be required by the Federal Housing Administration (FHA), Veterans Administration (VA) and U.S. Department of Agriculture (USDA). Until then, mortgage lenders will continue to use the existing URLA. [See RPI Form 202]

While lenders may not use the full URLA until 2018, beginning January 1, 2017, mortgage lenders may begin using the demographic supplement to the new URLA. Like the full URLA, use of the demographic supplement is mandatory beginning January 1, 2018. The Consumer Financial Protection Bureau (CFPB) encourages (but does not require) lenders to begin using it in 2017 to ensure a smooth transition to the new forms. [See Fannie Mae Demographic Information Addendum to Form 1003]

Preventing mortgage discrimination

The demographic supplement asks applicants to self-identify their sex, race and ethnicity. If the applicant chooses not to provide that information the lender is obligated to guess, and to say whether the lender made the guess by visual observation or by using the applicant’s surname.

The reason the CFPB wants this information is to catch lenders exhibiting patterns of discrimination.

Some mortgage professionals are uncertain as to how this will be useful, as reported in HousingWire. Still, in 2012 Countrywide settled for discriminating against minority homebuyers by:

  • charging higher fees to minorities than White homebuyers with equivalent qualifications; and
  • steering minority homebuyers into subprime mortgage products, like volatile adjustable rate mortgages (ARMs), which also resulted in higher up-front fees for the lenders.

Countrywide’s parent company, Bank of America, paid $335 million to Countrywide’s many victims of discrimination.

Real estate agents and brokers who suspect their clients are victims of discrimination can report it at California Bureau of Real Estate’s (CalBRE’s) website.

HMDA rollout

The new demographic supplement is one part of the rollout of the federal Home Mortgage Disclosure Act (HMDA). The federal government uses data gathered under HMDA to detect patterns of unlawful discrimination. [12 Code of Federal Regulations §§1003 et seq.]

HMDA requires state and federally regulated banks and brokers who meet set thresholds and make decisions on whether to grant a mortgage secured by residential real estate to compile data on mortgages they originate or purchase. This is required whether the mortgage is consumer or business, regardless of the number of units.

Reporting brokers are required to submit HMDA data by March 1 of each year.

For more information on the new URLA, see Fannie Mae.

Related article:

Home Mortgage Disclosure Act (HMDA) changes in 2018