Fannie Mae Form 1003 is a loan application form designed by Fannie Mae and Freddie Mac that is used by lenders to obtain financial and personal information from borrowers who apply for a mortgage loan secured by a one to four unit residential real estate. Form 1003 is also known as the Uniform Residential Loan Application (URLA). Form 1003 is widely adopted by mortgage lenders as a standard loan application form. It is generally referred to as Form 1003, or just 1003 and pronounced as "ten-o-three". Freddie Mac also uses the same application form and is known as the Freddie Mac Form 65.
Initial 1003 and Final 1003
Form 1003 is filled at two times during the loan process. Form 1003 is first completed at the time of making a loan application and this form is generally referred to as "Initial 1003". Initial 1003 helps establish the date of application, permissible purpose for obtaining credit report, and intent of borrowers to make a joint application. The initial 1003 may be completed by the borrower or by the loan originator on behalf of the borrower. However, the initial Form 1003 should be signed by each borrower. For applications taken over phone, the loan originator may complete the application form and then send the completed form to the borrower for signature. For applications taken through the Internet, the lender may obtain an electronic signature or send a printed copy to the borrower for signature.
The second Form 1003 is prepared at the time of loan closing. This is generally referred to as "Final 1003" and is prepared by the lender. The purpose of Final 1003 is to have the borrower confirm the loan application information after all the details have been verified by the lender.
Another Form 1003 is prepared at the time of loan closing. This is generally referred to as "Final 1003" and is prepared by the lender. The purpose of Final 1003 is to have the borrower confirm the loan application information after all the details have been verified by the lender. Therefore, the final 1003 has the income, asset, and employment information that the lender verified and used for underwriting purposes.
Instructions and Signatures: The first section contains certain instructions for the borrowers and explains who needs to complete the form. The instructions are also designed to meet the requirements of Regulation B and UDAAP.
Section I - Type of Property and Term of Loan: The loan product that is applied for is entered in this section. Certain information such as Agency Case Number and Lender Case Number would be filled by the loan originator.
Section II – Property Information and Purpose of Loan: This section contains information relating to the property that will be used as collateral for the loan. The loan purpose and title information is also entered.
Section III – Borrower Information: Personal information of the borrower and co-borrower is entered.
Section IV – Employment Information: Two years of employment history is entered in this section. Part-time, temporary, and seasonal jobs held in last two years should also be entered.
Section V – Monthly Income and Combined Housing Expense Information: This section contains the income information for the borrower and co-borrower. The second set of information is the Combined Monthly Housing Expense information which determines the current cost of housing expense. The borrower should seek the loan originator’s assistance when filling the proposed expense information in the Initial 1003.
Section VI – Assets and Liabilities: The information relating to all the assets and liabilities of the borrowers is entered here. The section also requires detailed information of any real estate owned by the borrowers in the Scheduled of Real Estate Owned.
Section VII – Details of Transaction: Details of the structure of the property transaction is entered here.
Section VIII – Declarations: Declarations related to past credit, current residency status, purpose of residence, and other declarations are made. Certain sections may require the borrowers to provide detailed explanations.
Section IX – Acknowledgement and Agreement: The borrowers provide acknowledgment to various disclosures and affirmations.
Section X – Information for Government Monitoring Purposes: The section requires ethnicity, race, and gender information which is required by Home Mortgage Disclosure Act (HMDA) and Regulation B for fair lending purposes. The section also contains additional information that the loan originator needs to enter.
Continuation Sheet/Residential Loan Application: The sheet is used to enter any additional information such as when there is not enough space in the form or when detailed explanations are required.
Agency Requirement: Fannie Mae and Freddie Mac require lenders to the use of Form 1003 for all loans that are sold to them. Since lenders sell a large number of loans to Fannie Mae and Freddie Mac, it is much easier to implement the Form 1003 for all loans instead of having different forms for agency and non-agency loans.
Simplifies Technology Development and Implementation: Most of the loan origination software systems have support for the Form 1003, including the ability to transmit the loan application electronically. Building customized application form entails additional costs.
Widely Understood: Form 1003 is widely used and understood by the industry which makes it easier to sell or transfer loans. This is especially useful when mortgage brokers are trying to shop at different lenders to obtain the best deal. They can simply take the same application form and submit to different lenders and not worry about filling different forms for each lender.
Meets Various Regulations: The design of Form 1003 meets various regulations such as Regulation B, Regulation C, and Unfair, Deceptive and Abusive Acts or Practices (UDAAP). Regulation B implements Equal Credit Opportunity Act (ECOA). Regulation C implements Home Mortgage Disclosure Act (HMDA). However, no regulation specifically requires the use of Form 1003. The lenders are free to use an alternate form as long as it is consistent regulatory requirements.
The loan originator or loan processor should have the primary responsibility to review the form for completeness and consistency of information. Any discrepancy in the income, employment, or asset information should be investigated and verified through independent sources. The lender’s Quality Control (QC) department may perform additional reviews of the form to ensure operational effectiveness. Internal audit, compliance, and risk management department would form the final layer of reviews to ensure that the form is being correctly completed.
Form 1003 is a vital document for a loan file and is used to demonstrate compliance with various regulations such as Regulation C, Regulation B, and Regulation X. Therefore, Form 1003 should be kept with the loan file for as long as the loan is outstanding. For cancelled, declined, or withdrawn loan the Form 1003 should be maintained for at least 25 months after the date when the decline notice was sent. This will meet the recordkeeping requirements of Regulation B.
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