Monthly Archives: April 2019

URLA & ULDD – The Latest Compliance Challenges

One of the more pressing initiatives over the past year relates to the updates to the Uniform Residential Loan Application (URLA) and the Uniform Loan Delivery Dataset (ULDD). For the first time in about 20 years, the URLA is getting a major overhaul and it isn’t just cosmetic. The URLA has a whole new format, with new fields, data points, and requirements. With the initiatives going into effect in February 2020, it’s high time that lenders take a look at how they will impact the industry’s approach to loan quality going forward.


Before we jump into the implications of these two initiatives, let’s do a quick review of the ‘whats’ and ‘whys’. The URLA has seen virtually no changes for the past 20 or so years. Why is it being changed now? Good question. In short, it’s because this should have happened a long time ago. This change was inevitable. We can’t go on conducting business he way we did 20 years ago when our industry has changed so dramatically and technology has evolved so much. Think about what personal computing was 20 years ago, and where we were with data collection and analysis. We’re capable of so much more. Our industry needs to start implementing a way to leverage the technological capabilities that are now at our fingertips. And the ULDD and URLA help us do just that.



From a quality control (QC) and compliance perspective, the big stressors are about data integrity, which, technically speaking, isn’t terribly recent news. The new URLA enhances the type of data collected and the placement of that data within the loan application. That means anytime you deliver a dataset to the GSEs, you need to have that dataset in a specific format, one that’s been laid out and mapped out in a certain way. But more importantly, you need to make sure of the integrity of that data.

This is one thing that lenders regrettably forget. They’re so concerned with how to deliver the new data, that often they forget about the quality of the data itself. This can be a costly mistake, because data quality has been a big industry focus the last couple of years as both Fannie and Freddie have been very critical on data integrity issues. You also have CFPB, which monitors the industry for data integrity issues with HMDA. Now that they’re asking for new data, you can rest assured they’ll be checking to be sure that data is accurate, not merely delivered in the proper format.

A critical focus with the new URLA and the updated ULDD, with their enhanced data sets, is making sure that the data is accurate. A real push has been around how to perfect that data—where the systems are and who’s delivering the data. The LOSs are all getting up-to-date with providers creating testing models with the URLA included. Their goal is to have this fully integrated by sometime this summer with the new URLA being required in February of 2020. Lenders should rest assured that most LOS platforms will cover these updates. However, lenders do need to be prepared for an even deeper data integrity review. That’s how you eliminate the problems that come out of core data.

When it comes to the ULDD, one of the big changes is the capture and reporting of the new HMDA required data fields. So, it’s not only about making sure that data is in the right field or correct format, but even more importantly, making sure the data is accurate. One of the focal points for the ULDD changes is fair lending. If it’s important enough to add a way to collect this data, you can bet that accurately reporting your data is vital. So now that we’ve established that data integrity is of the utmost importance, we need to figure out how lenders can most effectively accomplish that.


The way lenders approach QC for ULDD and the new URLA will determine a lot about whether or not they thrive as the industry moves into more robust data collection and analysis.

Can lenders survive with their old processes when the ULDD and URLA go into effect? Sure. But I’m not sure for how long. Lenders that want to thrive and succeed in the new era need to be proactive in assuring data accuracy. If you’re still asking whether you should use technology to verify and validate data, or if you can get away with doing it manually utilizing the “stare and compare” method, the same process as they have for past 20 years, you should prepare for other more proactive lenders to pass you by.

Manual processes are risky and using technology to merely identify data integrity issues is short changing your potential for success. The real question you should be asking is whether the data in your system is accurate, and more importantly, how technology can help assure that data is accurate. Focus on the number of errors found within the data and identify the root cause of the data integrity issues. Then implement corrective action planning to track and correct these data issues once and for all. This will turbocharge your QC and risk management path into true proactive operations, a key component of industry leading lenders.

Using technology that requires manual processes, when a more advanced alternative exists, is risky. Lenders need as systemic a process as possible for data validation. One of the big things we see repeatedly is that lenders have all this data, all this information, but the systems don’t talk to each other. They receive an abundance of the required documents to support a mortgage loan, but often fail to obtain the digital data that created the document. One of the great things about utilizing the abundance of digital data that is at our fingertips is, when technology is utilized  to its full extent, this digital data allows systems to talk to each other. Otherwise, at some point along the manufacturing process, somebody needs to go back and review that actual document and verify that the data in that document was actually brought into the system accurately. It’s always best to use technology that enables all systems to communicate and share data. Otherwise, you’re risking errors and even fraud.

The appraisal is a good example of this data vs. document process. The vast majority of loans these days have some form of an appraisal to provide a verifiable opinion of value. Most all appraisals come with the actual XML data file attached. Some tech providers offer the ability  to conduct a form of data validation using that data file, and not require a person to handle the appraisal or input data points into the LOS. Without that technology, each data point is typically manually entered into the LOS by a loan processor. And of course, every time you key in a data field, you have an opportunity for error.

If you want to be proactive in improving data integrity, the key is to bring as many data fields as possible into your LOS in a digital  format. And if you bring in the data digitally from your actual source document, the appraisal in this case, you’ll know the data fields on that appraisal are 100 percent accurate. Authority documents can be used to help validate data fields from other documents referencing the appraised  value. Technology allows lenders to compare  and validate all the data within their LOS and other key documents to that authority document with a click of the button


Data quality has always been important, but the ULDD and URLA initiatives are only going to make it more so. It’s important for the lending community to be even more critical of their data integrity. Don’t make the unfortunately all-too- common mistake of believing that delivering data in accordance with the ULDD assures that your data is right. In reality, the ULDD makes sure all their data fields are there, but does not validate the data is accurate.

Financial risks are high when compromising data integrity. Inaccurate data can cause a multitude of problems, from delays in loan delivery, extended warehouse dwell times, and, in many cases, pricing adjustments. In the worst cases, repurchase obligations result. If you think the GSEs won’t say they don’t want to buy a loan because the data you provided doesn’t match what you indicated you were selling, guess again. It’s the worst-case scenario, but it happens. Regulators, like the CFPB, for example, aren’t going away anytime soon. They’re closely scrutinizing HMDA data and have already levied numerous fines, some in the millions, for data validation errors.

So, no matter what changes are coming in  May for the ULDD and in early 2020 for the URLA, a critical piece in preparation is to make sure your data is accurate. Technology can relieve a number of loan delivery headaches while bringing  a substantial reduction in overhead. You just need to decide whether you will accomplish your goals by reacting to market conditions, or by proactively managing them.

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Strategies for TRID Compliance and Eliminating Tolerance Cures

The CPFB’s TILA-REPSA Integrated Disclosure (TRID) Rule went into effect on October 3, 2015, following a two-year period of consternation and anticipation on the part of mortgage industry professionals, particularly lenders and originators. When the CFPB initially released the final rule on TRID in late 2013, the rule contained more than 1,900 pages.

In an effort to make the mortgage settlement process smoother for the borrower, TRID combined four disclosures into two. The Good Faith Estimate (GFE) and initial Truth-in-Lending disclosures combined to form the Loan Estimate, and the HUD-1 and final Truth-in-Lending disclosures combined to form the Closing Disclosure. At the same time, the CFPB shifted the onus of accurate settlement forms from the settlement service provider to the creditor, thus creating numerous compliance and quality control challenges for mortgage creditors.

It has been more than three years since TRID launched. The CFPB has made changes to the rule along the way, but lenders and originators still find it challenging to comply with parts of the TRID rule. Mortgage Compliance Magazine recently sat down with Belinda Kraus, Vice President of Risk and Compliance at Trelix™, an Altisource Business Unit, to discuss what challenges she is seeing in the industry and what to do about them.

MCM: Is there any way we could have seen this coming when TRID went into effect?

Belinda Kraus: In 2015, had you asked me to forecast quality control issues three and a half years into the future I would not have anticipated we would still be dealing with TRID issues. If I choose the top three quality control trends I currently see the industry struggling with, the top two relate to TRID compliance.

The first trend is in regards to fee tolerance violations on the Closing Disclosure. Documenting the Loan Estimate requires each fee to be placed in one of three different categories– a zero tolerance, 10 percent cumulative tolerance, or no tolerance bucket depending on the fee and whether or not the borrower is allowed to shop for the service provided. The zero tolerance and no tolerance categories sound as though they would have similar requirements; however, they are subject to two different thresholds. Zero tolerance refers to those fees or services that the creditor does not allow the borrower to shop for. The no tolerance category is unlimited, or those fees that the creditor does not have control over, meaning the borrower chose to shop and selected a third-party provider that was not recommended by the creditor. Keep in mind, though, creditors are always required to make a good faith effort to accurately estimate the fee utilizing the best information reasonably available at the time. The 10 percent cumulative tolerance bucket is for charges or fees that relate to recording of legal documentation and the third-party services the creditor recommended and the borrower selected. As the loan manufacturing process progresses, services and fees are selected causing fees to potentially move from one bucket to another. This is where the industry is getting tripped up and fee tolerance violations are occurring.

MCM: What can lenders do to counteract this?

Kraus: The best practice to curtailing TRID fee tolerance violations is to utilize industry compliance technology. Use it early and often. I recommend that lenders run the compliance tool a minimum of four times during the lifecycle of the manufacturing process. Run the tool before the borrower is given the Loan Estimate, run it on any revised Loan Estimates, run it before the Closing Disclosure is given to the borrower and again if there are any revisions to the Closing Disclosure. It is cheaper to run your compliance engine multiple times throughout the process than it is to continually pay tolerance violation fees.

MCM: What else are lenders still having trouble with as far as TRID compliance?

Kraus: The second TRID violation trend relates to the timing of the Loan Estimate and the creditor requesting the borrower’s intent to proceed. The rule specifies the borrower must receive the Loan Estimate first, and then the creditor can ask the borrower for their intent to proceed. How the creditor receives the intent to proceed is also dictated by the rule. Intent to proceed can be done verbally or as a written communication. The written communication can be in an email or a pre-printed form from the lender wherein the borrower signs indicating, “Yes, I have received the Loan Estimate, and now I’m indicating my intent to proceed with this loan.” Borrower silence is not indicative of an intent to proceed. The lender must ensure the intent to proceed communication received from the borrower is retained in the file. There are a couple of ways that this can happen, but the biggest hurdle can be retaining proof that the borrower received the Loan Estimate prior to the loan officer asking the borrower to give their intent to proceed.

MCM: Is technology the solution in this area as well?

Kraus: Yes. Utilizing technology is a way to ensure loan officers don’t put the cart before the horse. If you build a hard stop into your technology that requires proof of Loan Estimate delivery before unlocking the intent to proceed field, then the loan officer can’t get overzealous and do the whole process at once. The lender must retain a record of the intent to proceed. So, what happens if the loan officer received verbal intent to proceed? Program your technology to include a date and time stamp field in the notes section, so you can still prove the Loan Estimate was delivered before the loan officer received the intent to proceed from the borrower. The CFPB really wants to see those two distinct steps.

MCM: That takes care of the two common struggles with TRID compliance. What else have you seen the industry struggling with outside of TRID?

Kraus: The third most common compliance issue is erroneous income and asset calculations. The industry seems to continuously struggle with these calculations, which boggles my mind a bit since we have all of this great technology that can do the work for us. Even an Excel workbook can be programmed to accept data input that will complete the calculations.

MCM: That sounds like a simple enough solution. Is there more to it?

Kraus: A formulated spreadsheet in Excel is the simplest use of technology for this purpose, but technology continues to progress and now optical recognition is becoming more commonplace in the mortgage industry. Ideally, a lender automates as much of the manufacturing process as they can. If the loan officer can scan income and asset documentation into optical recognition software at the onset of the application process, errors will be reduced on the front end. It boils down to whether or not the lender can justify the cost of technology over the cost of correcting the errors that occur.


TRID 2.0 Compliance – What You Need to Know About Service Providers

When it comes to consumer shopping for third party settlement service providers, the TILA-RESPA Integrated Disclosure (TRID) rule contains several compliance requirements.  These requirements include specific disclosures and impact the fee tolerance thresholds.  This article addresses some common questions regarding the service provider shopping provisions.

What does it mean to “shop” for a service?

Page two of the loan estimate contains disclosures regarding the closing cost details of the transaction.  Under Loan Costs, sections B and C disclose those services that consumer may and may not shop for.  A consumer shops for a service provider when he/she she is free to select the provider of his/her choice.  Lenders may impose reasonable requirements on the service provider’s qualifications, such as ensuring the settlement provider is appropriately licensed. However, requiring that a provider use a certain type of software would not be considered a reasonable requirement. Any lender provider requirements should correspond to the ability of the provider to perform the service in a competent manner.

In contrast, a consumer is considered not to have the ability to shop for a provider if the lender selects the provider and offers the consumer no other alternative.  Note that if the lender limits the service provider choices to a list selected by the lender, the consumer is not considered able to shop.

Are lenders required to allow service provider shopping?

Lenders have considerable leeway in determining which services may or may not be shopped for.  On one end of the spectrum, a lender could select all settlement service providers and not allow any consumer shopping. Typically, lenders allow consumers to shop for some but not all service providers.  Note that state law may require that a borrower be able to select their own attorney, which would mean the borrower must be able to shop for that provider. And remember, fees for required services that may not be shopped for are subject to the zero-fee tolerance threshold.

What is the Written List of Service Providers?

If the consumer may shop for a settlement service provider, the lender must provide a written list of service providers (written list). The written list is a separate disclosure that must also be provided within three business days of receiving an application.

From a disclosure perspective, the written list must identify at least one provider per service that may be shopped for and include detailed contact information for each provider. The providers disclosed on the written list must correspond to those services disclosed on page two of the loan estimate, in section C. The written list must also state that the consumer is not required to select the provider disclosed on the written list. Note that the TRID rule provides a model form for the written list; however, lenders may create their own document but it must track the model form.  In addition to disclosing services the consumer may shop for on the written list, lenders may also disclose those services that may not be shopped for. And, the lender may include a statement that it is not endorsing any provider disclosed on the written list.

What are the fee tolerances for services that may be shopped for?

At the Loan Estimate stage, fees for services that may be shopped for are included in the 10 percent tolerance category. This tolerance may or may not shift at the closing disclosure stage, depending upon whether the consumer chooses a provider from the written list.

If the consumer selects a provider from the written list, the fee for that service remains in the 10 percent cumulative tolerance category. If the consumer selects a provider that is not on the written list, the fee for provider shifts to the no tolerance category.  As long as the service provider fee is disclosed on the written list is in good faith, increases in that fee will not be subject to any tolerance restrictions.  Because of the potential shift in tolerance, it’s important to monitor consumer shopping activity.

What are the consequences for failing to comply with the written list requirements?

Failure to comply with the written list requirements may result in changes to fee tolerances and may constitute a Regulation Z violation. If the lender fails to provide the written list, but the facts and circumstances indicate the consumer was permitted to shop, the fees for the service are subject to the 10% cumulative tolerance standard. However, if those fees are paid to the lender or an affiliate, they are subject to the zero tolerance standard. Note that even if the consumer is considered permitted to shop, failure to provide the written list would be considered a Reg Z violation.

With respect to errors or omissions on the written list, if the consumer is not prevented from shopping and the fees are not paid to the lender or an affiliate, the fees are subject to the 10% cumulative tolerance standard. If the error or omission does prevent the consumer from shopping, the charges are subject to the zero tolerance standard. Determining whether the error or omission prevents the consumer from shopping is based on all of the relevant facts and circumstances.

While TRID compliance often focuses on the loan estimate and the closing disclosure, it’s important to train staff on the written list of service provider requirements.  Potential shifts in tolerance thresholds and compliance violations can certainly add up over time.

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