With the imminent transition to a new Uniform Residential Loan Application comes the phasing out of a data file that could cause processing problems later if not addressed, according to the Mortgage Industry Maintenance Standards Organization.
Between surging loan volumes and the
“They all know URLA is coming. What they may not know is that means the 3.2 file is going away and they will need to replace that data set. That’s important because it’s used for all these different purposes it wasn’t originally designed for,” MISMO Vice President Jonathan Kearns said in a recent interview.
More specifically, the 3.2 file has been historically used as the de facto standard for sets of data transferred to many counterparties that mortgage companies work with outside of Fannie Mae, including loan buyers and sellers, mortgage insurers and servicers, he said.
As a result, that file is embedded in many industry processes and systems and has been updated with extensions over time. So when support for the file ends in March, those updates no longer occur, creating the risk that mortgage companies could transmit incomplete data sets. When systems detect incomplete information, they often automatically prevent loans from moving forward in the pipeline.
The MISMO community has developed an alternative to the 3.2 file that is specifically designed to serve as a standard in various information exchanges that occur in the mortgage industry.
MISMO designed that alternative, the
“With the 3.2 file, the entire loan application dataset gets transferred whether it is needed or not. With ILAD, they have the ability to only get what they want and define that clearly,” said Kearns.
Since its launch in September 2019, ILAD has been adopted by some lenders, but it hasn’t yet gotten as much traction as MISMO ideally would like to see, he added.
“Some of the loan origination software systems now have it and allow lenders to export files in either a 3.2 format or the ILAD format. Most of the vendors have built the export and some have built the import functions, but it’s not fully implemented,” he said. “However, there are probably more companies than not that are unaware this is happening and that don’t realize the 3.2 file is being utilized outside of submissions to DU.”
Replacement of the 3.2 file in broader systems doesn’t have to be done immediately and there may well be other projects like URLA implementation itself, which are bigger priorities, but companies should ideally have a plan to start identifying where in their operations the file needs to be replaced by the second half of this year, Kearns suggested.
“It should be a project on your road map for sure,” he said. “It’s not something that’s going to stop working on March 1, but I think a car analogy is great. The car in this case is at the end of its life and there are no more parts available for it, so if it starts breaking you are going to have to get a new car.”
