With the intent to support industry changes and meet customer expectations, the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac have redesigned Uniform Residential Loan Application (URLA): they plan to begin accepting new mortgage applications with the redesigned URLA from February 1, 2020. The GSEs have supported a voluntary participation transition period prior to the mandatory use date.

The transition to URLA with all its moving parts can be intimidating and cause uncertainty throughout any organization. There is absolutely no requirement to implement URLA into production during this early period. However, the ability to adapt production earlier for full or limited implementation can be a huge advantage organizationally.

One of many ways to take advantage of the voluntary period is by implementing a Pilot Program. A pilot program allows organizations to test the loan origination solution in production without the risk of a full rollout. An apt loan origination solution will allow end-to-end digitization with agile and optimized workflows, leading to transparent lending process and compliance with regulatory norms.

Just as important, a pilot program allows one to test internal policies, practices, procedures and business methods. It allows one to experience the unknowns, which, no matter how tight the plan, will always exist in the gap between test assumptions and the reality of production.

The voluntary period will allow a sample group to work through many challenges and improve the cohesiveness of the implementation for the rest of the organization. It will generate in-house expertise that can play vital roles as future champions and trainers, saving the rest of the organization undue hardship.

Pros of an URLA pilot program

Pilot programs are a great way to gain experience with new programs. In doing so, one can identify implementation challenges early, allowing larger-scale adoption to run more smoothly.

While ‘experimentation’ sounds scary, the limited production environment allows the luxury of just that. Some organizations start with volunteer customers on new program rollouts, who are asked in advance if they are willing to share the new journey. URLA is a candidate for that approach. The approach can be as creative or as benign as is reflective of your typical method.

By working out problems on a much smaller spectrum, one can avoid additional overhead when widespread implementation occurs due to inefficiencies and planning assumption missteps.

Pilot programs can help build a network of technology, policy, process and procedure champions, both within and outside the organization. Employees that participate in the pilot program have the opportunity to become part of the implementation’s value chain. These individuals become internal advocates, helping sell advantages of the new process to their peers, answer end-user questions, and more. Their task is to document lessons learned, find disjoints between the new technology and business processes, and then help with problem-solving. This ‘solve it small’ approach allows a rapid turnaround on identifying problems and driving solutions into the pilot group. Once a change is proven successful, it is then replicated into training materials and procedures.

Pilot groups help find flawed assumptions before they play out across the enterprise.

As with any project, a pilot program must have well-defined goals and there must be ample governance in place to assure the information is consumed and findings are implemented timely across the rest of the organization.

The steps of a pilot program 

1. Set goals and objectives for the pilot program
       Define accomplishments with specific milestones and articulate what success looks like.
2. Decide on a length of time
    Once objectives for the pilot are determined, decide on the length of time for the program. To have a fair sampling of the challenges, one might run the program for 30, 45 or 90 days. It is important to assure normal use in a day-to-day setting but allows time to prove changes are effective from lessons learned. Pilot programs are a natural extension of quality assurance and testing when structured correctly.
3. Choose the pilot group carefully
   The group needs to be large enough to provide sufficient feedback, but small enough to reach consensus on how to improve process issue and challenges. The groups that are selected also need to be those who will use the loan origination solution regularly and who can influence to assure positive adoption throughout the organization.
4. Develop an implementation plan for the pilot program
   The implementation plan used for the pilot program should be the same as expectations set for the rest of the organization. Do not skip this valuable feedback. One observation or tweak could reduce rollout time substantially. Plan on training the pilot program staff as early as possible.
5. Consumepilot program feedback
   The pilot program is an opportunity to assure both the technology and business processes are in sync before rolling out: What works, what doesn’t and what are the internal changes required before full rollout. Organizations must have the ‘just enough’ structure around the pilot program to consume the programs’ change findings. Some may need compliance sign off; some may be large enough to require executive committee sign off and so on. Be sure to have ‘just enough governance to implement important findings quickly. With each change recommended by the pilot team, the definition of time saved and/or what was assured by the change needs to be documented. This will help determine the impact of the pilot program on implementation and ROI.
6. Aggressively address challenges
   The primary goal should be to address challenges during the pilot, testing the change to assure outcome, and logging the results such as time saved, process assured, etc.For those challenges, that cannot be addressed due to the time or size of the pilot team, address the challenge before rolling out across the organization. Have a simple weighting system of priority such as:

Critical: Must be addressed before the rollout

Urgent: Should be addressed before the rollout

Important: Address as soon as possible

Nice: Order by ROI

Executing a pilot program

A pilot program may signal a sense of doubt in being able to adapt to both the regulatory and technology changes to employees. Be careful how a pilot program is branded, especially if the organization has not had previous experience with such programs. Proactively communicate to employees the need and benefits of production testing and how that improves their experience when the change comes.

To eliminate confusion, establish new processes during the pilot program period. Since some employees will be using the new URLA process while others use historical processes, there is the potential for data and information to get mixed up in translation.

A pilot program may be time-consuming. You must consider if a pilot program will finally save production resources. The larger the organization, the more a pilot program makes financial and operational sense. But, as with any project, make the best assumptions and let ROI be a real part in the decision making.

A reasonable URLA pilot program will add a minimum of 30-45 days before organization-wide rollout. This must be accounted for in the ROI. If the pilot can be completed concurrently and within the rollout timeframe, ROI is typically higher than if the pilot extends rollout dates. Also with URLA, there is a mandatory use date that must be met, so consider wisely.  

Paul Christison

Compliance Delivery Manager - Gallagher Solutions, Wipro

Paul joined Wipro in July 2011 with more than 20 years of experience in mortgage operations, executive leadership, compliance and IT solutions. Following his passion for IT lending solutions, he holds SCRUM Master, LEAN, 6Sigma Yellow Belt and Para Legal Certificates.