Big changes are coming in the standard application for home financing. But if lenders are not on the ball, the modifications could throw a monkey wrench into the mortgage sector. At least for a while.

The changes in the Uniform Residential Loan Application, aka form 1003/65, “are long overdue,” says Jon Haring, director of product management and a compliance expert at Ellie Mae, who notes that the document hasn’t been updated in nearly 20 years. But they “won’t be easy” to implement.

They have “the potential to disrupt” not just loan originations but also secondary market activities, Haring warns. Most lenders these days sell their loans to investors on the aftermarket.

The improvements to the form are intended to make the lending process more efficient and increase certainty. But, the Ellie Mae executive reports, they “are creating anxiety among lenders.”

Some 2,500 lenders use Ellie Mae’s loan origination system to process loans. About 40 percent of all mortgages are made on the Pleasanton, California-based company’s platform.

Fortunately, lenders have 11 more months to prepare for the changes. Use of the new URLA won’t be compulsory until Feb. 1, 2020. But in the lender world, that’s not a lot of time, especially with the heavy buying and selling seasons approaching rapidly and federal and state regulators looking over their shoulders.

At their request for a pre-mandatory test period, lenders can start using the upgraded form after July 1 so they can get any bugs out of their systems. But the changes impact not just lenders, but everyone else up and down the food chain, including title companies, mortgage insurers and servicers -- the companies that collect payments and distribute monies for insurance, taxes and profits on behalf of investors who own your loan.

“It’s probably unlikely that everyone across the entire lending ecosystem will be ready to support it. ... And if they don’t get it implemented correctly and information doesn’t flow completely and effortlessly, there could be delays or even pushback along the production line.”

Among the numerous challenges facing lenders and their vendors: Websites and point-of-sales platforms will need to be modified, data will have to be saved and reported, and decisions will have to be made regarding unusual situations, such as non-borrowing owners. And all of this will have to be done under existing compliance regulations.

The good news is that there is gold at the end of the transition rainbow. “The changes upon us are very positive,” Haring says. “Ultimately, the new URLA form is simpler, cleaner and provides better instructions for borrowers, and that’s a step forward.”

One of the benefits of the new application form is that it puts a lot of the information that’s already being gathered into greater context. For example, the current 1003/65 collects employment information in one place and income info in another, and there’s no correlation between the two. Consequently, the underwriter must figure out where the applicant’s money comes from.

With the new form, though, employment and income data are married together, side-by-side, so there is no longer confusion about how much of the borrower’s income comes from a particular source.

Also, space to list current and former addresses and employers is limited on the current application, as is the spot for listing other properties owned by the would-be borrower. But on the new form, those sections can be expanded to accommodate all the information a borrower needs to provide. 

There are numerous other positives, too, all intended to provide additional levels of detail to make it easier to process, underwrite and securitize your loan. Here are just a few of the other improvements:

-- Borrowers should find the new form easier to complete without a loan officer’s help.

-- A new section allows you to choose the language you prefer. And there are now spots for email addresses and mobile phone numbers, items that weren’t even considered the last time the URLA was updated.

-- There’s a new field for rental or mortgage payments on former residences.

-- Another new section allows you to list assets such as earnest money, employer assistance and sweat equity that are tied to the transaction.

-- An unmarried addendum helps define the relationship between the borrower, additional borrowers and others with an interest in the property.

“All this may seem mundane; no big deal for consumers,” says Haring. “But in the final analysis, the time to get pre-approval or even approval should improve, and there will be less fallout because something was unclear. And eventually, the time it takes to close should be shorter.”

To protect borrowers with VA-guaranteed mortgages against churning by less-than-scrupulous lenders, the Department of Veterans Affairs has taken steps to make it more difficult to refinance loans that are all but brand new.

Under an interim rule that takes effect today (Feb. 15), loans used to remove equity from the underlying property cannot exceed 100 percent of the reasonable value of the underlying property. Also, while funding fees can be rolled into the amount being financed, any part of the charge that causes the loan amount to exceed 100 percent of value must be paid in cash.

These two new requirements will go a long way toward stopping lenders who try to convince veterans and current servicemen and women to turn in their VA loans shortly after they take them out in favor of higher-balance mortgages that are loaded with extra fees and charges.

The poachers offer a lower interest rate, but borrowers have to pay closing costs all over again, so there is little or no savings. And in some cases, the new loan is more costly than the old one, even at the lower rate.

Now, the VA says the new loan must provide a “net tangible benefit” to the borrower which can be satisfied in one of several ways. For example, it can have a shorter term, lower rate or lower payment. Or it can have a balance of 90 percent or less of value, eliminate mortgage insurance, or exchange an adjustable rate mortgage for one that has a fixed rate.

For some loans, all fees and charges to the borrower must be recouped within 36 months. Also, the rate on a fixed-to-fixed refi must be at least a half a percentage point lower; on an fixed-to-ARM refi, it must be at least 2 points lower.

A sign of the times: A Manhattan construction company is believed to be the first to post a “Men and Women at Work” sign at a building site.

As part of Plaza Construction’s effort to encourage women to enter the field, it is posting the gender-neutral sign at the entrance to all of its jobs in and around New York as well as Washington, D.C., Tampa and Miami.

Women account for 9 percent of the construction workforce nationally, but they account for a fourth of Plaza’s crews.

Most wannabe buyers are scared off by higher interest rates. But the more important factor in deciding whether to buy now or wait is what your monthly mortgage payment will be.

The typical house payment stands as good proxy for affordability because it shows how much a borrower would have to qualify for to obtain financing to buy the median priced home. It’s not exact because it only covers principal and interest. It does not include annual property tax and homeowners insurance payments, a portion of which lenders collect each month and pay out when those bills become due. But it is close enough.

Unfortunately, according to analysts at CoreLogic, the typical P&I payment rose 16.4 percent over the 12-month period that ended last September, whereas mortgage rates were up by less than 6 percent. The reason, of course, is that the median house price is up -- by 5.6 percent to $221,697 over the same period.

And it could get worse. CoreLogic research analyst Andrew LePage says the consensus forecast is for mortgage rates to bump up by 0.5 percent by this coming September. Couple that with a 2.7 percent increase in the median house price, and the typical house payment will rise from $912 in September 2018 to $994 in the same month this year.

That’s an 8.9 percent year-over-year jump on top of the 16 percent leap recorded in the previous 12-month period.

There’s no doubt that households with children have different needs from those sans kids when it comes to purchasing houses.

For example, kidless buyers could hardly give a hoot about schools. But for half of all those with children under the age of 18, the quality of the school district is a paramount consideration, according to the latest research from the National Association of Realtors. Forty-five percent say convenience to schools is an important factor.

Buyers with kids also purchase larger houses -- 2,100 square feet on average vs. 1,750 -- with four bedrooms as opposed to three for those without kidlets.

Buyers with and without children are on the same page when it comes to finding the right property. In both situations, 54 percent said it was the most difficult step in the process. But 27 percent of those with kids said child care expenses forced them to delay their purchase. And many made compromises when they did buy because of child care costs.

They compromised on the size of the house, distance from their workplaces and the condition and style of the house they bought. But only 10 percent caved on school quality and just 5 percent bought farther away from school than they originally wanted to be.

Fraud isn’t exactly rampant in the mortgage field. But it does happen, perhaps more frequently than you’d think.

Sometimes, it’s the would-be borrower who commits the crime. Some lie on their applications about how much they earn, how long they’ve been on their current job, or the extent of their indebtedness. Others tell their lenders they plan to live in the house when they really don’t, while still others fail to disclose the true source of their down payments or side deals with someone who’s part of the transaction.

But sometimes it’s the loan applicant who’s hoodwinked. And they can be had in any number of ways.

One ruse that should be on every homebuyer and seller’s radar screen is what’s known in the trade as a “business email compromise.” It starts when a buyer receives an email with “new instructions” to wire the money he or she will be using to close the transaction at settlement to an unfamiliar address “because our servers are down.” But if the buyer complies, the money is usually gone forever.

This scam is far more lucrative than robbing a bank. Whereas bank robbers get away with just $1,400 on average per heist, according to Bruce Phillips, senior vice president and information security officer at WFG National Title insurance in Portland, Oregon, the average lost to swindlers in the wire scam is $140,000. One poor soul lost $1.2 million, never to be seen again.

The miscreants are successful because people “rely on emails way too much,” Phillips offers. “If you are in the process and it sounds reasonable, most people are going to do as requested. We are almost conditioned to accept an email from someone we’ve never seen before, send our money off and expect their promises to be kept.”

There are other scams, too. Like emails that advise you that your closing statement is attached. Ditto for a buyer’s so-called purchase contract addendum. Then there are those noxious emails informing you that your current credit score is available.

If you are not actively engaged in buying a house, you’d probably ignore these messages. The same goes for emails from banks with which you have no accounts.

But if you are somewhere in the buying process, phishing expeditions like these are likely to draw more than passing attention. Senders of these and other electronic missives are hoping that they’ll latch onto an unwitting homebuyer or seller who will open the attachments. Don’t!

If you do, your money or your identity is likely to be snatched in an instant, and then you’ll have hell to pay -- not to mention hundreds or even thousands of dollars -- just to get it back and clean up the financial mess these reprobates may cause.

To determine if an email is legit, check the sender’s address. If you get something from Experian, for example, the message will come from experian.com, not atozflavorful.com. If it is ostensibly from your bank, the bank’s name will be in the address after the at sign.

“Anybody can send an email with a company logo,” warns Steve Octaviano, chief technology officer at Blue Sage, an Englewood Cliffs, New Jersey, vendor that sells a cloud-based digital lending platform. “You have to make sure it actually comes from the lender.”

Understand that you are always a target, so never trust an email, adds Phillips, the title company executive. “Always pick up the phone, call what you know is a good number for people you have been dealing with and validate the email. In every case I’ve looked at, that simple step would have stopped the scam in its tracks.”

When corresponding via email, many legitimate lenders, title companies and other service providers will invite you into their portals. That is, when you respond, they will answer back with an email of their own asking the sender to reply back with his or her password and other identifying information. If the sender can’t do that, access is denied and fraud artists are blocked.

Nowadays, 80 percent of the scams target buyers and sellers as opposed to businesses because “people don’t buy and sell houses that often and the likelihood of recovery is extremely low,” the title company executive says.

There’s no dollar figure associated with the scheme, but it is part of the $1.2-$1.3 billion that is estimated by the FBI to have been lost by consumers to wire fraud last year alone. That’s almost triple the amount lost in 2016. And since estimates are that only 14 percent of all business email compromise scams are reported to the authorities, losses are probably much greater.

Another precaution most consumers fail to take is to use an entirely new and totally different password for their real estate transactions, one that’s not easily guessable.

And don’t use 123456 or the word “password” as your password; they are the top two passwords currently in use.

Finally, two more steps to protect yourself: First, look for the lock icon at the bottom of the site you are trying to access. It means all data is encrypted so no one else can get at it without your passcode. And second, a legit email will contain a disclaimer warning you not to send money without first validating the request. So hold on to your wallet.