“It’s a train wreck,” one seasoned loan officer told me of the mortgage industry’s new Uniform Residential Loan Application (URLA). “It’s a nightmare,” said another.

Personally, I’m not sure what to think quite yet. Perhaps it’s a nightmare about a train wreck, but I’m totally open to the possibility that when the nightmare is over and the dust settles, everything will be just fine.  

Fannie Mae and Freddie Mac redesigned the URLA and required that all mortgage lenders use the new form on any new mortgage originations beginning March 1. On Fannie Mae’s website, the agency said the changes were made to help lenders better capture relevant loan application information and support the industry’s move to digitize the loan origination process. But that wasn’t exactly the initial reaction the change elicited.

Loan Officers tend to be overly dramatic when their cheese gets moved. I haven’t originated a loan in two years, but just thinking about how different this new application is has me stressed out for my former colleagues. The evolution into creature of habit begins to take hold within six months of becoming a loan officer. There are so many things to remember and so many tasks to complete, it takes years to become exceedingly proficient. Over time, loan officers develop their own system to maximize efficiency. Behind the scenes it’s like an assembly line in a factory, and everyone knows their role. So, introducing a completely revamped mortgage application that is much longer and way more detailed than ever before could really grind the gears in the machine.

Last year was likely the busiest on record for the mortgage industry. To keep up with the volume, most loan officers worked weekends and burned the midnight oil, and they’re still doing that to some extent. Now they’ll have to find time in their day to wrap their brain around a much more complex application because their entire business revolves around it. Certainly, their clients will have questions about the application. Case in point, I received an email from a loan officer with a screenshot of a blank section of the new application. The subject of the email was “New URLA Humor.” The screenshot showed the “subject property information” section of the application, specifically the following Yes or No question: “Property is subject to priority lien?” In the body of the email, the loan officer said, “Every client is going to nail this one!” The good news, I guess, is that applicants have a 50/50 chance of getting that question right on their own.

Certainly, it’s the loan officer’s job to guide their clients through the loan process, so there isn’t a lot of room for complaining. With that said, the most common consumer gripes about the mortgage industry revolves around how inefficient and document intensive the process is. Over the last two years, the industry has made huge strides in making online mortgage applications more user-friendly. When the borrower can complete their own online application, the loan officer spends less time on data entry and has more time to offer guidance to their clientele. It’s way more efficient.

After all that progress, it’s not crazy to view this new application as a setback. Still, I’d like to believe that 60 days from now, once everyone is used to the changes, we’ll all come away with a different point of view. But it’ll probably take all 60 days to get there. I haven’t gone through every single page, but from what I’m told, it almost feels like you’re in a room with a whole bunch of hidden doors because if you answer a question a certain way, you’ll be taken to a new page so you can provide even more information.

Musical Chairs

Several $100+ Million mortgage originators have recently switched employers, headlined by Brian Scott Cohen who left Wells Fargo for Guaranteed Rate. Cohen has originated over $5 Billion in mortgages in his 17-year career.

The reason for the exodus is twofold, at least. First off, correspondent lenders are splashing the cash at loan officers. The market for sign-on bonuses is pretty crazy right now. If you closed $100 Million in mostly self-sourced mortgage volume in 2020, you’re likely in line for a bonus offer somewhere in the neighborhood of $500,000. I can only imagine what a $700 Million producer might command.

Second, there are too many horror stories about how some retail banks have managed their mortgage divisions during the past 18 months. This week, a loan officer who was on his second day at a new job with a major correspondent lender told me that one of his client’s refinances was in process for over a year with the major retail lender he left behind. The bank perpetually extended the rate at no cost to the client and told the loan officer with each rate extension that the file wasn’t a priority to be reviewed and underwritten. For the most part, the loan officer is the only person interfacing with angry customers who need someone to yell at. That’ll take a toll on anyone’s psyche.

A story about a year-long refinance process sounds crazy, but it’s completely legitimate and fits in with so many other stories – like loan officers getting paid a salary instead of commission in exchange for not writing any loans at all. Banks have literally tried to avoid writing mortgages in many instances over the last 12 months. It takes a long time for most masochistic loan officers to finally leave the big brand name behind, but eventually, some reach their breaking point. The chance to break free from that situation, and simultaneously take advantage of a plump sign-on bonus is playing a role in the ongoing migration.