Using the Encompass Compliance Service - For use with Encompass Broker & Banker Editions - Ellie Mae
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Using the Encompass Compliance Service
For use with Encompass Broker & Banker EditionsCopyright Statement © 2021 ICE Mortgage Technology. All rights reserved. Encompass® and the ICE Mortgage Technology logos are trademarks or registered trademarks of ICE Mortgage Technology or its subsidiaries. Using the Encompass Compliance Service - Encompass Broker and Banker Editions Rev. 6/25/2021
Table of Contents
Chapter 1: Introduction ................................................................ 1 Chapter 3: Fee Mapping ............................................................. 19
Managing Standard Fees ....................................................... 19
Chapter 2: Compliance Review Setup ...................................... 2 How Does the Compliance Audit Interpret and Treat Fees? ........ 19
Compliance Review Setup: User Access ................................... 2 Specific Fees ............................................................... 20
Accessing Compliance Review Setup ....................................... 2 Fee Mapping Procedures ....................................................... 21
Report Types .......................................................................... 3 Adding Fees ................................................................. 21
What is Included in Each Review? ............................................ 3
Restricting Entry of Free-Form Fees ........................................ 22
TILA/TILA-RESPA Review ............................................... 3
Encompass Compliance Service Default Fees Table ................. 23
TILA-RESPA Review ...................................................... 3
TILA Right of Rescission Review ...................................... 3 Chapter 4: Encompass Compliance Service ......................... 39
HOEPA Review .............................................................. 3 Ordering a Compliance Report ................................................ 39
Higher Priced Mortgage Review ....................................... 3 Viewing the Fields That Are Assessed During a Loan Check ...... 39
GSE .............................................................................. 4 Viewing the Report ................................................................ 40
Consumer Credit Review ................................................ 4 Status Results .............................................................. 43
Home Mortgage Disclosure Act (HMDA) Review ................ 4 Viewing a List of Compliance Issues ............................... 44
Rate Spread Review ....................................................... 4 View a List of Loan’s Fees ............................................. 44
FHA .............................................................................. 4 Compliance Review Log Alert ......................................... 44
Citi Mortgage Rules ........................................................ 4
OFAC Review ................................................................ 4
VA Review ..................................................................... 4
LO Compensation Review ............................................... 5
NMLS Registration Review .............................................. 5
Ability to Repay/Qualified Mortgage Review ...................... 5
Flood Zone Enterprise Rule ............................................. 5
Licensing Tests .............................................................. 6
Completing the Compliance Review Setup Wizard ...................... 6
Report Tab ..................................................................... 6
License Tab ................................................................. 14
Automatic Ordering Tab ................................................ 16
Users Tab .................................................................... 16
Fee Mapping Tab ......................................................... 17
Starting and Stopping Compliance Reviews ............................. 18
Granting Permission to Use the ECS Data Viewer .................... 18
iChapter 1 Introduction The Encompass Compliance Service enables you to perform a loan check (i.e., order a compliance report) at any point during the loan process. During a loan check, loans are reviewed for compliance issues based on Truth in Lending (TIL), HOEPA, State and Local High Cost, State Consumer Credit, and other industry regulations and mandates. Once the check is complete, a compliance report is generated indicating the loan's compliance issues and exceptions, as well as data within the loan that successfully passed the review. An individual with an Encompass admin user ID can use the Compliance Review Setup to configure the Encompass Compliance Service. This tool provides an instant loan file check and determines if a loan complies with selected state and federal regulations. The following chapters provide detailed information about configuring and using your Encompass Compliance Service: • Chapter 2, “Compliance Review Setup”, provides detailed instructions for completing the Compliance Review Setup. These settings determine the reviews that are included in a loan check, when loan checks are performed, and the users who are permitted to manually order a compliance report. • Chapter 3, “Fee Mapping”, steps you through setting up your fees using the Itemization Fee Management tool. A description of each fee used by the Encompass Compliance Service is provided, as well as tips and best practices for managing your closing fees. • Chapter 4, “Encompass Compliance Service”, discusses how to order an Encompass Compliance Service report, view a completed report (complete with a list of returned alerts, errors, and pass/fail messages), and go to a field where data has not passed the review. To access all of the features described in the guide, you must be logged in to Encompass as the admin user. Chapter 1: Introduction 1
Chapter 2
Compliance Review Setup
Prior to using the Encompass Compliance Service, Encompass admins must Accessing Compliance Review Setup
complete the Compliance Review Setup where they can:
• Specify the type of compliance report your company will use. To Access Compliance Review Setup:
• Specify the types of reviews that will be included in the compliance report. 1 On the menu bar, click Encompass, and then click Settings.
• Identify your company’s lending classification and lending and broker licenses. 2 On the left panel, click Additional Services, and then click Compliance
• Enable the automatic ordering of compliance reports when selected loan Review Setup.
milestones are completed. 3 If this is the first time you are accessing Compliance Review Setup, click the
• Specify loan criteria to determine when the specified compliance review should Get Setup button in the upper-right corner.
be included in the compliance report.
• Identify users who can manually order compliance reports.
• Use the Itemization Fee Management tool to map closing fees on the 2010
Itemization form to matching fields in the Encompass Compliance Service.
• Start or stop automatic report ordering.
• Make changes to the Compliance Review Setup.
4 If you have already completed the setup but want to change the settings, click
Users with an Encompass admin User ID can also grant other users access to the Change Setup button in the upper-right corner.
Compliance Review Setup, based on their persona.
Compliance Review Setup: User Access
To Grant Users Access to Compliance Review Setup:
1 On the menu bar, click Encompass, and then click Settings.
2 On the left panel, click Company/User Setup, and then click Personas.
3 Click to select a persona in the left panel, and then click the Settings tab.
4 In the Company Settings section, select Compliance Review Setup.
5 Click the Save icon.
Chapter 2: Compliance Review Setup 2Report Types TILA-RESPA Review
The following report types are available from the Report tab: The TILA-RESPA review applies to closed-end loans secured by 1-4 unit
dwellings attached to real property, where the application is taken on or after
NOTE: The Standard Report (Subscription) option is still provided in the
October 3, 2015.
Compliance Review Setup wizard however this report type is a legacy product and
not available to new Encompass Compliance Service customers. For more NOTE: This review does not apply to open-end HELOCS (field ID 1172 equals
information please contact your ICE Mortgage Technology relationship manager. HELOC) or loans not made primarily for personal, family, or household purposes
(field ID QM.X110).
• Premium - The Premium reports (Subscription and Closed Loan Pricing)
contain: If the Encompass Compliance Service does not receive enough information to
determine whether the loan is secured by real property, it will apply the TILA-
• Federal Truth-In-Lending Act (TILA) Tolerance and TILA-RESPA tests
RESPA Rules to all closed-end loans secured by 1-4 unit dwellings, made
• Federal Home Ownership and Equity Protection Act (HOEPA) State and primarily for personal, family, or household purposes, where the application date
Local High Cost Thresholds tests is on or after October 3, 2015 and where the Encompass Form Version (field ID
• Approved Fannie Mae Points & Fees and “HUD-HOEPA” Mortgage 3969) is RESPA-TILA 2015 LE and CD.
Thresholds tests For more information about the TILA-RESPA Review, refer to the Encompass
• Higher Priced Mortgage review Compliance Service TILA-RESPA Review Integration Guide.
• State Consumer Credit Law review TILA Right of Rescission Review
• Home Mortgage Disclosure Act (HMDA) review The TILA Right of Rescission review tests a non-purchase money closed-end loan
• Rate Spread review secured by a 1-4 unit primary dwelling to determine whether it is in compliance
with TILA rescission timing requirements. The Right of Rescission test compares
• Custom - All Custom reports are set up by ICE Mortgage Technology based on
the disclosed right to cancel expiration date and the loan disbursement date to the
your company's configuration and loan volume. All of the Premium reviews can compliance review's calculated right to cancel expiration date and returns an
be included in a Custom report, plus Licensing reviews and custom business exception if either date is earlier than the earliest allowable date.
rules to enforce internal compliance policies or investor-specific program
requirements. NOTE: When working with dates for this review, input the last day of the RTC
expiration regardless of the funding date.
Custom reports cannot be used unless you obtain a custom service code (e.g.,
excluding Saturdays from a report) from ICE Mortgage Technology Technical HOEPA Review
Support. This review checks for compliance with HOEPA and applicable state and local
jurisdictions. The Encompass Compliance Service calculates the high cost
thresholds as defined in HOEPA and by applicable state and local jurisdictions to
What is Included in Each Review? determine if a loan is considered a high cost loan. The federal, state, and local
APR and Points and Fees threshold calculations ensure proper classification of
TILA/TILA-RESPA Review fees by ascertaining to whom the fee is paid (for example, lender, affiliate,
This review includes comparisons, tests, functions and calculations based on the originator, or provider) and by whom the fee is paid. The results of the review
Truth In Lending Act and Mortgage Disclosure Improvement Act (MDIA). display in the High Cost section of the compliance report.
Specifically, the Encompass Compliance Service recalculates the finance charge
amount, amount financed, APR, total of payments, payment schedule, and the
Higher Priced Mortgage Review
amortization schedule. The MDIA test validates that the loan's disclosure dates This review calculates thresholds and ensures critical regulatory requirements are
are in compliance with the “3-7-3 rules” set forth in the MDIA. Note that the MDIA met with respect to “higher priced mortgage loans” (HPML). HPML thresholds are
test is optional and you can choose to exclude it from your compliance reports. calculated according to Section 12 C.F.R. § 226.35(a)(1) of the Regulation Z.
The results of the review display in the TILA-Tolerance and TILA-Payment Effective October 1, 2009, Regulation Z defines HPMLs to include loans with an
sections of the compliance report. APR above a specified threshold. The threshold for a first-lien loan is 1.5% or
more above the average prime offer rate for a comparable loan (which is not an
Chapter 2: Compliance Review Setup 3unusual interest rate). The threshold for a second lien is 3.5% or more. If the loan Home Mortgage Disclosure Act (HMDA) Review
is classified as an HPML, the Encompass Compliance Service analyzes the loan's
This review evaluates the pertinent loan data to HMDA requirements. The FFIEC
prepayment penalties to determine if they are prohibited under Regulation Z. The
Validity and Quality edits are processed against the HMDA fields. The results of
results of the review display in the Higher Priced section of the compliance report.
the review display in the HMDA section of the compliance report.
GSE Rate Spread Review
The Government Sponsored Enterprise (GSE) review includes the following:
This review provides an alert advising the lender of the HMDA Rate Spread on a
• Fannie Mae Points & Fees - The review calculates the allowable Fannie Mae Higher-Priced Mortgage Loan. The Encompass Compliance Service uses the
points and fees thresholds as defined in the Fannie Mae Lender Letter 03-00, greater of the Disclosed APR, Encompass APR, or calculated APR as the loan’s
issued April 11, 2000 (and codified in Fannie Mae’s Selling Guide Part VII, APR for comparison purposes. The HMDA-LAR Rate Spread reporting
Section 104.11), as updated and amended based upon loan data. requirement occurs when the difference between the loan's APR and the average
• Freddie Mac Points & Fees - The review calculates the allowable Freddie Mac prime offer rate for a comparable transaction is equal to or greater than 1.5% for
points and fees thresholds as defined in the Freddie Mac Industry Letter, issued first liens or 3.5% for subordinate liens. The results of this review display in the
December 28, 2000 (and codified in Freddie Mac’s Seller/Servicer Guide HMDA Rate Spread Loan Enterprise Review section of the compliance report.
Section 22.32), as updated and amended based upon loan data. FHA
• GSE HUD-HOEPA Mortgage High Cost Thresholds - The review calculates The FHA review evaluates FHA loans and identifies certain issues in the following
the high cost thresholds as defined in the Fannie Mae Selling Guide Part VII, areas: Seller Contribution Limit, Tax Service Fee Prohibition, Late Charge and
Section 104.15, as updated and amended, and the Freddie Mac Single-Family Grace Period Limits, ARM Adjustment and Rate Restrictions, MSA Loan Limits,
Seller/Servicer Guide Chapter 22, as updated and amended, based upon loan and Loan Term Limits. The results of this review display in the FHA Enterprise
data. Rules Reviewer section of the compliance report.
The results of the review display in the GSE section of the compliance report.
Citi Mortgage Rules
Consumer Credit Review This review includes certain CitiMortagage® policies available to approved
The State Rules review applies the requirements of over 340 US state laws for correspondents. The results of this review display in the Citi Enterprise Rules
consumer residential mortgage loans secured by real property. It enforces the Review section of the compliance report.
laws as they relate to:
OFAC Review
• Usury rate ceilings percentage caps
The OFAC review compares all of the loan's borrower names and aliases against
• Prohibited fees the Office of Foreign Assets Control's (OFAC) Specially Designated Nationals,
• Fee percentage or dollar amount limits Blocked Persons and Countries List (i.e., the “SDN” list), Bureau of Industry and
Security Denied Persons list maintained by the U.S. Department of Commerce,
• Higher-rate, higher-risk, higher-priced, sub-prime, non-prime, and rate spread as well as similar lists established by the Canadian and British governments.
loans
• Prepayment penalty prohibitions and limitations
VA Review
The VA Enterprise Review contains rules to test for some of the prohibited terms
• Late fee dollar amount limits and length of late fee grace periods
on VA loans. This review contains the following enterprise rules:
• Interest accrual start dates
• Federal - Late Charge Limitation (VA)
• Negative amortization prohibitions
• Federal - Grace Period Limitation (VA)
• Balloon payment prohibitions or term limitations
• Federal - Discount Points May Not Be Financed in a Purchase Money Loan (VA)
• Payment and term limitations
• Federal - Discount Points May Not Be Financed in a Cash-Out Refinance Loan
The results of this review display in the State Rules section of the compliance (VA)
report.
Chapter 2: Compliance Review Setup 4• Federal - Discount Points Limitation in a Rate and Term Refinance Loan (VA) by a 1 - 4 unit dwelling unless the creditor makes a reasonable, good faith
(Warning) determination of the consumer's ability to repay the loan. In addition, the rule
• Federal - Loan Origination Fee 1% Limitation (VA) establishes certain protections for creditors who make a “qualified mortgage”.
• Federal - Unallowable Itemized Fees (1% Maximum) (VA) The Ability-to-Repay/Qualified Mortgage compliance review will the apply tests
described below, based on the ATR and QM Type which can be selected in
• Federal - Loan Origination Fee and Unallowable Itemized Fees Charged (VA)
Encompass multiple ways (and will be applied in the following order):
• Federal - Rate and Term Refinance Itemized Fees Charged (VA) (IRRL
• The Ability-to-Repay Loan Type (Field QM.23) and Qualified Mortgage
Warning)
Loan Type (QM.24) selected on the ATR/QM Management tool's ATR/QM
LO Compensation Review Eligibility matrix.
This review provides a Warning message on a closed-end loan secured by a 1-4 • The default Ability-to-Repay Loan Type and default Qualified Mortgage
unit dwelling with an Application Date on or after April 1, 2011 that includes the Loan Type indicated on the Report tab in the Compliance Review Setup (in
Mortgage Broker (loan originator) receiving any of the following fees from Encompass Settings > Additional Services).
someone other than the Borrower: • The system default of General Qualified Mortgage.
• Loan Discount For General Qualified Mortgage, the compliance review applies to closed-end
• Yield Spread Premium loans secured by 1-4 unit dwellings with application dates on or after 1/10/2014,
an ATR Type of “Qualified Mortgage” and a QM Type of “General Qualified
• RESPA - Your Charge/Credit (Points) amount
Mortgage”. Due to the new 2021 requirements, the following transaction types
• Prepaid Interest have been updated in ECS:
• Interest Rate Buydown Fee • Higher Priced Covered Transaction - See Mavent Alert: Federal: Section 43
The Encompass Compliance Service provides a Warning message on a closed- Higher-Priced Covered Transaction, Safe Harbor and Presumption of
end loan secured by a 1-4 unit dwelling with an Application Date on or after April Compliance. For General Qualified Mortgage loans with an application date on
1, 2011 that includes the Mortgage Broker (loan originator) receiving or after October 1, 2022, ECS will calculate ARM APRs (for the HPCT Threshold
compensation directly from the Borrower and from another person. Test) using the maximum interest rate that could apply at any time during the first
five years after the date on which the first regular periodic payment will be due
NMLS Registration Review as the interest rate for the loan.
The NMLS (Nationwide Mortgage Licensing System) Registration Review review Once the Ability to Repay/Qualified Mortgage review is run on a loan file, a report
verifies an individual loan originator’s NMLS information against NMLS data using is provided that details rate thresholds, fee assessments and discount points that
NMLS B2B Access. The review may be used to test for the applicable individual count towards the 3% QM ceiling. This will be reflected under the Ability-to-
loan originator’s NMLS registration information on seasoned loans, with the Repay/Qualified Mortgage Review heading in the report. The details of each
applicable data and information at the time the loans were closed. individual test will appear under the ATR/QM Summary Worksheet. The ATR/QM
The Encompass Compliance Service returns Warning or Failure messages if the Summary Worksheet will reflect the overall QM eligibility as well as the status of
loan originator's NMLS unique identifier, name, or license number does not match each individual test.
the NMLS registration data provided by NMLS B2B Access. The service also For more information, refer to the Working with Ability-to-Repay (ATR/QM) and
returns the name and license(s) associated with the individual loan originator’s HOEPA Regulations guide.
NMLS unique identifier for easy reference.
Flood Zone Enterprise Rule
Ability to Repay/Qualified Mortgage Review
This review checks whether the subject property is in a flood zone. If the subject
This review checks loans to for compliance with the Consumer Financial property is in a flood zone, (field ID 2366), an exception message will be returned
Protection Bureau’s (CFPB) amendment to Regulation Z that implements if a Flood Insurance Reserve (i.e., a charge mapped to "Insurance Impound -
sections 1411, 1412, and 1414 of the Dodd-Frank Wall Street Reform and Flood" in the Itemization Fee Management) is not included in the loan.
Consumer Protection Act (Dodd-Frank Act) and prohibits creditors from making
most residential mortgage loans against a closed end first or junior lien secured
Chapter 2: Compliance Review Setup 5Licensing Tests Report Tab
ICE Mortgage Technology maintains a nationwide database of over 450,000 1 On the Report tab, select a report type from the Report drop-down list.
licensed mortgage entities, including lenders and brokers, that is updated as NOTE: The Standard Report (Subscription) option is still provided in the
frequently as state regulatory agencies make new licensing information available. Report drop-down list however this report type is a legacy product and not
The custom License review uses this database to determine the following: available to new Encompass Compliance Service customers. For more
• The lender assigned to the loan is licensed in a particular jurisdiction. information please contact your ICE Mortgage Technology relationship
manager.
• The license is active and in good standing.
• The license authorizes the lender to originate this transaction type.
• The results of the review display in the License section of the compliance report.
Completing the Compliance Review Setup
Wizard
Use the Compliance Review Setup wizard to select a compliance report type,
configure the types of reviews to include in the loan check, specify your company's
lending licenses, set up automatic reporting, enable users to manually run a
report, and map closing cost fees to the appropriate fields in the Compliance
Service. Use the five tabs in the setup wizard to configure the settings for the
Compliance Service.
2 Select the check box to authorize the report purchase.
3 The Channel option (field ID 2626) selected on the Borrower Summary form
indicates how your company is handling a specific loan, such as Brokered or
Banked. l, and as you proceed through the Compliance Review Setup wizard,
you will indicate how the loan's channel will be used to trigger certain
compliance tests, to determine which milestone will be used to trigger
compliance reports, and to determine which conditions to apply before running
Chapter 2: Compliance Review Setup 6a compliance report. Use the Default Channel drop-down list to select the 5 In the Reviews to include section, select your reviews, based on your selection
channel to use for loans where a channel has not been selected on the in Step 1.
Borrower Summary. NOTE: Companies using the Subscription option agree to pay for Encompass
NOTE: If necessary, the Automatic Ordering tab provides a Loan Channel Compliance Service fees as set forth in the Encompass Compliance Service
option where you can indicate that you do not want the system to run a contract. Click the Terms & Conditions link on the Report tab in the Setup
compliance review if a loan channel has not been selected on the Borrower Wizard for details about each agreement.
Summary form.
Standard Report (Subscription)
4 Using the Configuration Options section, you can set up the review so that The Standard Report (Subscription) is a legacy product and not available to
geocode data is automatically populated to the HMDA Information form, new Encompass Compliance Service customers. For more information
control the company name that is printed on the Customer line at the top of the please contact your ICE Mortgage Technology relationship manager.
compliance report, display expanded fee details in the compliance report, and
automatically add comments to new compliance report results in the TQL This option includes the following reviews:
Services tool. • TILA/TILA-RESPA Review
• To import geocode data to the HMDA Information input form, select Import • HOEPA Review
Geocode Data. Data from the report will be added to the appropriate fields
• Higher Priced Mortgage Review
on the HMDA Information form - MSA Number (field ID 699), County Code
(field ID 1396), State Code (field ID 1395), and Census Tract (field ID 700) • GSE Review
— only if the field is blank. Select Overwrite Existing Field Data to • Consumer Credit Review
automatically import data from the report into the loan fields even if the
field contains data. The existing data will be overwritten. • Home Mortgage Disclosure Act (HMDA) Review
• To print the company name that is entered in the Company Name field • Rate Spread Review
(field ID 315) on the 1003 - Page 3 input form, select the Use Company • FHA Review
Name from 1003 Page 3 check box.
• Citi Mortgage Rules
• If you want the company name entered on the 1003 - Page 3 to print
• OFAC Review
to the compliance report only for loans going through specific loan
origination channels, select the check box (or check boxes) for the • VA Review
desired channel. For example, if you want this name to print to the • LO Compensation Review
compliance report for all loans going through the Banked - Retail or
• NMLS Registration Review
Brokered origination channels, select the Banked - Retail and
Brokered check boxes. • Ability to Repay/Qualified Mortgage Review
• To print the company name entered in the Name field on the Company • Flood Zone Enterprise Rule
Information page in Encompass Settings to print to the compliance For information on setting up these reviews, refer to the Premium Report
report, do not select the Use Company Name from 1003 Page 3 (Subscription) or Premium Report (Closed Loan Pricing) section.
check box. This name will print to all compliance reports, regardless of
their origination channel. (If the Use Company Name from 1003 Page Premium Report (Subscription) or Premium Report (Closed
3 check box is currently selected, clear the check box.) Loan Pricing)
• To display expanded fee details in the compliance report, select the 1 Clear the TILA/TILA-RESPA Review check box if you do not want to
Display Expanded Fee Details in Compliance Report check box. include the TILA/TILA-RESPA review in the loan check.
• To automatically add comments to new compliance report results in the If you are including the TILA/TILA-RESPA Review:
TQL Services tool, select the Automatically add comments to new • Click the Edit icon to designate required channels, milestones,
compliance report results in the TQL Services tool check box. fields that must be satisfied before the TILA/TILA-RESPA Review
will run, manage which components of the review is run, when the
Chapter 2: Compliance Review Setup 7finance charge tolerance portion of the review will run, how a Additional Settings Tab
rebate will be treated, select whether the Loan Estimate or Closing
• In the TILA Finance Charge Run Conditions section, if you want
Disclosure preview will be run, or select whether investment
the finance charge tolerance portion of the review to run, select
properties will be included in the TILA-RESPA rules.
Run Review only when a certain Milestone is reached from the
drop-down list, and then select the milestone from the appropriate
drop-down list. Select a milestone for each loan channel as
needed.
Review Requirements Tab
NOTE: The Select Additional Condition applies to the entire
• In the Required Channel Types section, if you want the TILA/TILA- TILA/TILA-RESPA Review.
RESPA Review to be included in the loan check only for loans in
• The available milestones under each corresponding TILA
a specific loan channel, select the Channel check box, and then
Review finance charge run condition channel are ones that are
select the check box for each loan channel you want to specify.
equal to or later than the milestones selected in the TILA/TILA-
• Select No additional condition from the drop-down list if you do RESPA Review run condition channels.
not want to apply any conditions to the review.
• The milestone selected in the corresponding channel under
• To restrict the review from being performed until a specific the TILA/TILA-RESPA Review run conditions is the default
milestone has been finished, select Run Review only when a channel selected under the TILA Finance Charge run
certain Milestone is reached from the drop-down list, and conditions for that channel.
then select the milestone from the appropriate drop-down list.
• In the Prepaid Finance Charge Credit Settings section, if you want
Select a milestone for each loan channel as needed.
to indicate how a rebate should be treated, select an option from
NOTE: For loans where a loan channel (field ID 2626) has not the drop-down list and then one of the radio button options. For
been selected on the Borrower Summary, the system uses the more information on the available options, see Prepaid Finance
Default Channel you selected on the Report tab when Charge Credit Settings.
determining the starting milestone for the TILA Review.
NOTE: If you select Apply rebate until Amount Financed
• To restrict the review from being performed until specific fields equals the Note Amount (Default), only the For all Negative
are populated, select Run Review only when certain Fields Prepaid Finance Charges option is available.
are filled in from the drop-down list, and then select the
• Apply rebate until Amount Financed equals the Note
desired fields from the Required Fields list.
Amount (Default) - A fee submitted as a negative prepaid
Components Tab finance charge offsets a fee submitted as a positive prepaid
Each component of the TILA-RESPA Review can be configured to finance charge. ECS allows this until the Calculated Federal
either be applied or suppressed for an individual loan review. You must Amount Financed equals the note amount.
select whether to run a component of the review at all, and at what NOTE: ECS will not allow the sum of all fees characterized as
point (milestone) the component should be run. a prepaid finance charge to go below $0.00.
• Select Run component only when a specific Milestone is • Apply rebate even if the Amount Financed exceeds the
reached if you want a component to be run when a specific Note Amount - For all Negative Prepaid Finance Charges
milestone is reached. A list of components is displayed. - A fee submitted as a negative prepaid finance charge offsets
• In the Milestone column, select which milestone will trigger a fee submitted as a positive prepaid finance charge. If the
each component to run. sum of all prepaid finance charge fees is less than $0.00, ECS
allows that negative amount to increase the Calculated
• By default, the Enable check box will be selected and the Federal Amount Financed above the note amount.
component will run when the specified milestone is reached. If
the Enable check box is cleared, that component will be • Apply rebate even if the Amount Financed exceeds the
disabled. Note Amount - For Negative Prepaid Interest Only - A fee
submitted as a negative prepaid finance charge offsets a fee
Chapter 2: Compliance Review Setup 8submitted as a positive prepaid finance charge. If the sum of • Select the 0.125% for regular loans... option to set up the report
all prepaid finance charge fees is less than $0.00, ECS allows to note a violation if there is difference between the disclosed
only negative prepaid interest fee to increase the Calculated APR and the current APR greater than 125% when reviewing a
Federal Amount Financed above the note amount. loan or if there is a difference between the disclosed APR and
• Apply rebate even if the Amount Financed exceeds the
current APR greater than .25% when reviewing an irregular loan
Note Amount - For all Negative Prepaid Finance Charges
excluding Negative Prepaid Interest - A fee submitted as a
negative prepaid finance charge offsets a fee submitted as a
positive prepaid finance charge. If the sum of all prepaid More Information About APR and Finance Charge Tolerances
finance charge fees is less than $0.00, ECS allows all negative When the APR and Finance Charge Tolerance option is included in
prepaid finance charge fees, except the negative prepaid the TILA/TILA-RESPA Review, the Encompass Compliance Service
interest, to increase the Calculated Federal Amount Financed does not test for APR over disclosure unless it is configured as part of
above the note amount. a Custom Report. In addition, the Encompass Compliance Service
NOTE: ECS will not allow the prepaid interest to be less than does not receive sufficient information to determine whether the APR
$0.00. is closer to the "actual APR" and therefore does not test for tolerances
pursuant to 12 C.F.R. § 226.22(a)(5).
• In the TILA-RESPA Preview Settings section, if you want to
indicate which preview (Loan Estimate or Closing Disclosure) Regulation Z defines the "accuracy" of the closed-end APR in 12
should be performed for a specific loan channel, select the C.F.R. § 226.22. As a general rule, the disclosed APR is considered
milestone from the appropriate drop-down list. accurate if it is not more than .125% above or below the APR
NOTE: You should only consider this setting when there is one or determined in accordance with 12 C.F.R. § 226.22(a)(1). In an
more Loan Estimates included within Disclosure Tracking but no "irregular transaction", the APR is considered accurate if it is not more
included Closing Disclosures. than .25% above or below the APR. An "irregular transaction" is one
that includes one or more of the following features (as defined in 12
• In the Investment Property Applicability section, if you want to C.F.R. § 226.22(a)(2) and (3)):
include investment properties in the TILA-RESPA (Know Before
• Multiple advances
You Owe) rules, select one or both of the check boxes.
• Irregular payment periods, or
• Select Apply TILA-RESPA Rules to Investment Properties
if you want to include investment properties in the TILA- • Irregular payment amounts (other than an irregular first period or
RESPA rules. an irregular first or final payment)
• Select Apply TILA-RESPA Rules to Owner-Occupied Because most creditors and secondary market purchasers prefer a
Rental Properties if you want to include owner-occupied more conservative test, you have the option of using the more
rental properties in the TILA-RESPA rules. restrictive 0.125% for all loans option or applying "the benefit of the
• When finished, click Save.
quarter" to irregular transactions (i.e., the 0.125% for regular loans
and 0.25% for irregular loans option). If you chose to apply the more
• Select the tolerance to apply to loan reviews using the APR and liberal test to irregular transactions, the Encompass Compliance
Finance Charge Tolerance options. Service uses the following criteria to determine the loan's status as
• Select 0.125% for all loans to set up the report to note a violation irregular:
if there is a difference between the disclosed APR and the current • A closed-end loan secured by a 1-4 unit dwelling that has:
APR greater than .125% when reviewing any type of loan.
• More than one advance in the payment stream
• More than three payment streams
• Payments that are not equal in amount (except for the first
and/or last payment), or
Chapter 2: Compliance Review Setup 9• Payment periods that are not equal (the first payment period • To restrict the review from being performed until a specific
can be different). milestone has been finished, select Run Review only when a
• Select the tolerance to apply to the Closing Disclosure Total of certain Milestone is reached from the drop-down list, select the
Payments to loan reviews either generally or for purposes of a milestone from the appropriate drop-down list, and then select a
consumer’s right of rescission: milestone for each loan channel as needed.
• $100 Disclosure and Rescission Tolerances - Checked by
NOTE: For loans where a loan channel (field ID 2626) has not
default. If checked, the following rules will be applied to the loan: been selected on the Borrower Summary, the system uses the
Default Channel you selected on the Report tab when determining
• For rescindable refinance transactions, Disclosed Total of the starting milestone for the TILA ROR.
Payments is considered accurate if it: (1) is understated by no
more than ½ of 1% of the face amount of the note or $100, • When finished indicating required loan channels or milestones,
whichever is greater; or (2) is greater than the amount required click Save.
to be disclosed. • When working with dates for this review, input the last day of the
• For rescindable refinance transactions, Disclosed Total of RTC expiration regardless of the funding date.
Payments is considered accurate, after the initiation of 3 Clear the GSE Review check box if you do not want to include the
foreclosure on a consumer’s principal dwelling, if it: (1) is GSE HUD-HOEPA Mortgage High Cost Thresholds review in the loan
understated by no more than $35; or (2) is greater than the check.
amount required to be disclosed.
If you are including the GSE Review, click the Edit icon to designate
• $100 Disclosure Tolerance - If checked, the following rule will be required channels, milestones, or loan types that must be satisfied
applied to the loan: before the GSE Review will run.
• Disclosed Total of Payments considered accurate if it: (1) is • To indicate that you want the GSE Review to be included in the
understated by no more than $100; or (2) is greater than the loan check only for loans in a specific loan channel, select the
amount required to be disclosed. Channel check box, and then select the check box for each loan
• Clear the MDIA check box if you do not want to include the channel you want to specify.
MDIA review in the loan check. • Select No additional condition from the drop-down list if you do
NOTE: When the MDIA check box is selected, the MDIA review will not want to apply any conditions to the review.
be performed on all loans, including investment properties. • To restrict the review from being performed until a specific
2 Select the TILA Right of Rescission check box to include the milestone has been finished, select Run Review only when a
TILA ROR review in your loan check. certain Milestone is reached from the drop-down list, select the
milestone from the appropriate drop-down list, and then select a
If you are including this review, click the Edit icon to designate milestone for each loan channel as needed.
required channels or milestones that must be satisfied before the
review will be performed on the loan. NOTE: For loans where a loan channel (field ID 2626) has not
been selected on the Borrower Summary, the system uses the
• To indicate that you want the TILA ROR to be included in the loan Default Channel you selected on the Report tab when determining
check only for loans in a specific loan channel, select the Channel the starting milestone for the GSE Review.
check box, and then select the check box for each loan channel
you want to specify. • To restrict the review from being performed based on loan type,
select Run Review only when certain Fields are filled in from
the drop-down list, and then select the type of loans you want to
be reviewed from the Required Loan Types list.
• When finished, click Save.
4 Clear the HMDA Review check box if you do not want to include the
HMDA review in the loan check.
Chapter 2: Compliance Review Setup 10If you are including the HMDA Review, click the Edit icon to designate • Select Overwrite Existing Field Data to automatically import
required channels, milestones, or fields that must be satisfied before data from the report into the Rate Spread field even if the field
the HMDA Review will run. currently contains data, and then select an option for the Rate
Spread value:
Review Requirements Tab
• Round Rate Spread - The rate spread is rounded to two
• To indicate that you want the HMDA Review to be included in the
decimal places, based on the value in the third decimal place.
loan check only for loans in a specific loan channel, select the
If the third decimal place is 0 to 4, the value is round down. If
check box for each loan channel you want to specify, or select the
the third decimal place is 5 to 9, the value is round up.
Channel check box to select all channels.
For example, if the rate spread is 10.254, then it should be
• Select an additional condition from the drop-down list: round down to 10.25. If the rate spread is 10.299, then it
• No additional condition - This selection will not apply any should be round up to 10.30.
conditions to the review. NOTE: This is the default option.
• Run Review only when a certain Milestone is reached - • Truncate Rate Spread - The rate spread is truncated to two
This selection restricts the review from being performed until a decimal places.
specific milestone has been finished. Select a milestone for For example, if the rate spread is 10.254, then it should be
each loan channel (default setting is “Submittal”) as needed. truncated to 10.25. If the rate spread is 10.299, then it should
NOTE: For loans where a loan channel (field ID 2626) has not be truncated to 10.29.
been selected on the Borrower Summary, the system uses the Regardless of which option is selected, if the rate spread has less
Default Channel you selected on the Report tab when than two decimal places, zeros are added so the rate spread has
determining the starting milestone for the HMDA Review two decimals. If the rate spread is a number less than 10.0 (e.g.,
• Run Review only when certain Fields are filled in - This 9.99), a leading zero is added so the ten's place always has a digit.
selection restrict the review from being performed until specific 6 Clear the NMLS Registration Review check box if you do not want
fields are populated. Select the desired fields from the to include the NMLS review in the loan check.
Required Fields list.
If you include the NMLS Review, click the Edit icon to indicate if the
Additional Settings Tab review is performed as of the application date, consummation date, or
• Select the Do not run HMDA Review option if the Exclude loan both.
from HMDA report check box (field ID HMDA.X24) is checked • In the NMLS Review Date section, select the milestones at which
for the loan on the HMDA Information input form. the NMLS review should be run.
• Select the Display expanded HMDA details in Compliance NOTE: You can select either the Application Date,
Reports option to display expanded HMDA details in the Consummation Date, or both.
Compliance Report. Selecting this option will display all the HMDA
• If only the Application Date is selected, the NMLS Review only
data points utilized in running the HMDA review
checks the loan’s current finished milestone as of the
• When finished, click Save. application date.
5 Select the Rate Spread Review check box to include the Rate Spread • If only the Consummation Date is selected, the NMLS Review
review in your loan check. If you are including this review, click the only checks the loan’s current finished milestone as of the
Edit icon to designate the rate spread run conditions that must be consummation date.
satisfied before the review will be performed on the loan.
• If you select both the Application and Consummation date for a
• To automatically populate the Rate Spread (field ID HMDA.X15) milestone, select whether registration is required as of BOTH the
on the HMDA Information form during a loan check, select Import Application Date AND Consummation Date or as of EITHER the
Rate Spread Data. Data from the report will be added to the Rate Application Date OR Consummation Date in the drop-down field.
Spread field only if the field is blank.
Chapter 2: Compliance Review Setup 11• If both the Application Date and the Consummation Date are • Select Run component only when a specific Milestone is
selected and the drop-down selection is “Application Date reached if you want a component to be run when a specific
AND Consummation Date”, the NMLS Review checks the milestone is reached. A list of components is displayed.
loan’s current finished milestone as of the application date and • In the Milestone column, select which milestone will trigger
the consummation date, and returns a failure if the loan officer each component to run.
is not registered/sponsored as of either date.
• By default, the Enable check box will be selected and the
• If both the Application Date and the Consummation Date is component will run when the specified milestone is reached. If
selected and the drop-down selection is “Application Date OR the Enable check box is cleared, that component will be
Consummation Date”, the NMLS Review checks the loan’s disabled.
current finished milestone as of the application date and the
consummation date, and returns a failure if the loan officer is
not registered/sponsored as of both dates.
• When finished, click Save.
7 Clear the Ability to Repay/Qualified Mortgage Review check box if
you do not want to include the ATR/QM review in the loan check.
If you are including the Ability to Repay/Qualified Mortgage Review,
click the Edit icon to designate required channels that must be
satisfied, as well as conditions that must be met, before the review will
be performed on the loan.
Review Requirements Tab
• To indicate that you want the Ability to Repay/Qualified Mortgage
Review to be included in the loan check only for loans in a specific
loan channel, select the check box for each loan channel you want
to specify or select the Channel check box to select all channels.
• Select No additional condition from the drop-down list if you do
not want to apply any conditions to the review.
• To restrict the review from being performed until a specific
milestone has been finished, select Run Review only when a
certain Milestone is reached from the drop-down list, and
then select the milestone from the appropriate drop-down list.
Select a milestone for each loan channel as needed.
NOTE: For loans where a loan channel (field ID 2626) has not
been selected on the Borrower Summary, the system uses the
Default Channel you selected on the Report tab when
determining the starting milestone for the Ability to
Repay/Qualified Mortgage Review.
Components Tab
Each component of the Ability to Repay/Qualified Mortgage Review
can be configured to either be applied or suppressed for an individual
loan review. You must select whether to run a component of the review
at all, and at what point (milestone) the component should be run.
Chapter 2: Compliance Review Setup 12Additional Settings Tab Select this check box to deviate from the standard Encompass Compliance
Service rules and apply modified rules to certain New Jersey first lien
• The Ability-to-Repay Loan Type field (field ID QM.X23) on the
third-party fee exceptions.
ATR/QM Management tool’s ATR/QM Eligibility tab is
automatically populated based on specific data in the loan file. The • After selecting the check box, read the Amendment to Agreement
value populated to this field determines what type of ATR review Governing the Use of the Encompass Compliance Service.
the Encompass Compliance Service performs. In the Default • If you agree with the terms, select the I have read, fully understand,
Ability to Repay Loan Type section, select a default ATR loan type. accept and agree... check box, and then click I Accept.
For loans where the Ability-to-Repay Loan Type field (field ID
QM.X23) on the ATR/QM Management tool’s ATR/QM Eligibility • If you do not agree to the terms, click I Decline, and then click Yes to
tab is blank, the compliance review will run the ATR/QM rules that confirm your decision. The position will not be in effect when compliance
apply to the ATR loan type selected here. reports are run.
• The Qualified Mortgage Loan Type field (field ID QM.X24) on the NOTE: If you do not apply this New Jersey First Lien Third Party Fee position,
ATR/QM Management tool’s ATR/QM Eligibility tab is a Failure message The New Jersey Licensed Lenders Act (N.J. Rev. Stat.
automatically populated based on specific data in the loan file. The 17:11C-23; N. J. ADC 3:1-16.2) does not allow {(Fee Name) (Fee ID:__)} to
value populated to this field determines what type of QM review be charged to the Borrower in NJ. will be included in the State Rules section
you want the Encompass Compliance Service to perform. In the of compliance reports run on first lien New Jersey loans if the borrower pays
Default Qualified Mortgage Loan Type section, select a default any of the following fees: Administration Fee, Annual Assessments-Impound,
QM loan type. For loans where the Qualified Mortgage Loan Type Assignment Fee, Assumption Fee, Bankruptcy Monitoring Fee, Bond Fee,
field (field ID QM.X24) on the ATR/QM Management tool’s Bond Review Fee, Broker Fees, CLO Access Fee, Closing Protection Letter,
ATR/QM Eligibility tab is blank, the compliance review will run the Compliance Testing Fee, Document Assembly Fee, Escrow Account
ATR/QM rules that apply to the QM loan type selected here. Servicing Fee, Escrow Waiver Fee, Funding Fee, HOA Certification Handling
Fee, Interest Rate Buy Down Fee, Loan Tie In Fee, MERS(R) Registration
• When finished, click Save. Fee, Modification/Amendment Fee, Mortgage Insurance Application Fee,
8 Select any additional reviews to include in the loan check. Office Expenses, Other Impound, Processing Fee, Program Participation Fee,
9 Click Next. Recording Fees-Assignment, Reinspection Fee, RESPA-Our Origination
Charge RESPA-Title Services and Lender's Title Insurance, RESPA- Your
Custom Reports Charge/Credit (Points), Rush Fee, Servicing Release Premium, Signing Agent
Custom reports are set up by ICE Mortgage Technology based on your Fee, Yield Spread Premium, Subordination Fee, Underwriting Fee, Unknown
company's configuration and loan volume. Contact your sales Fee-Finance Charge, VA Funding Fee, Verification Fee, Wire Transfer Fee,
representative to determine the reviews to include the report. Custom Appraisal Desk Review Fee, Appraisal Field Review Fee, Appraisal Review
reports cannot be used unless you obtain a custom service code (e.g., Fee, Document Preparation Fee, Document Redraw Fee, Notary Fee, Payoff
excluding Saturdays from a report) from ICE Mortgage Technology Demand Fee, Settlement or Closing Fee, Subordination Preparation Fee, and
Technical Support. Unknown Fee-Non Finance Charge.
For information on setting up the reviews, refer to the Premium Report Washington First Lien Fee Position
(Subscription) or Premium Report (Closed Loan Pricing) section. Select this check box to deviate from the standard Encompass Compliance
6 In the Compliance Deviations section, select the New Jersey First Lien Third Service rules and apply modified rules to certain Washington first lien fees.
Party Fee Position or Washington First Lien Fee Position check box to • After selecting the check box, read the Amendment to Agreement
deviate from the standard Encompass Compliance Service rules and apply Governing the Use of the Encompass Compliance Service.
modified rules to certain New Jersey first lien third party fee exceptions or
certain Washington first lien fees. • If you agree with the terms, select the I have read, fully understand,
accept and agree... check box, and then click I Accept.
New Jersey First Lien Third Party Fee Position
• If you do not agree to the terms, click I Decline, and then click Yes to
confirm your decision. The position will not be in effect when compliance
reports are run.
Chapter 2: Compliance Review Setup 13By selecting this option, you are requesting two modifications to the standard The Encompass Compliance Service user has requested the modification
compliance rules. See below for a definition of the standard rules and the that all first lien Processed Loans be excluded from the Standard Rule.
requested modifications. Pursuant to this request, Modified Rules will be created that will exclude
all first lien Processed Loans submitted by the user from the Standard Rule
• Standard Rule:
described above. The Modified Rules will not fail a first lien Processed
The Encompass Compliance Service applies the Consumer Loan Act Loan when the total of all fees, except for Loan Discount, paid by the
(“CLA”) to all loans made by a CLA licensee secured by real property Borrower and paid to the Lender, exceeds 4% of the first $20,000 or 2%
located in Washington. The CLA regulator advised outside counsel that percent thereafter of the principal amount of the loan. Therefore, the user
only fees expressly authorized under the CLA are permitted. RCW will not receive failure messages on first lien Processed Loans that would
31.04.105(2); WAC 208-620-555; WAC 208-620-560(6). As the regulator otherwise trigger the above Standard Rule.
interprets this requirement strictly, and the Loan Origination Fee, Loan
Discount Fee, and Commitment Fee are the only fees that a lender is License Tab
expressly permitted to charge as of January 1, 2010, the Encompass NOTE: State rules and licensing reviews are not included in Custom Reports.
Compliance Service will fail the loan if any fee other than a Loan When you reach this point in the Custom Report setup, click Next to proceed to
Origination Fee, Loan Discount, or Commitment Fee is charged to the the Automatic Ordering tab.
Borrower and paid to the Lender. The Encompass Compliance Service
1 On the License tab, select a Broker Type from the drop-down list.
applies the CLA lender fee restriction to both first and subordinate lien
loans.
Requested Modification:
The Encompass Compliance Service user has requested the modification
that all first lien Processed Loans be excluded from the Standard Rule.
Pursuant to this request, a Modified Rule will be created that will exclude
all first lien Processed Loans submitted by the user from the Standard Rule
described above. The Modified Rule will not fail a first lien Processed Loan
when any fee other than a Loan Origination Fee, Loan Discount, or
Administration Fee is charged to the Borrower and paid to the Lender.
Therefore, the user will not receive a failure message on first lien
Processed Loans that would otherwise trigger the above Standard Rule.
• Standard Rule:
The Encompass Compliance Service applies the Consumer Loan Act
(“CLA”) to all loans made by a CLA licensee secured by real property
located in Washington. The CLA regulator advised outside counsel that
only fees expressly authorized under the CLA are permitted. RCW
31.04.105(2); WAC 208-620-555; WAC 208-620-560(6). The Revised
Code of Washington provides: “Every licensee may...In connection with
the making of a loan, charge the borrower a nonrefundable, prepaid, loan
origination fee not to exceed four percent of the first twenty thousand
dollars and two percent thereafter of the principal amount of the loan 2 If your company is a depository institution, select the company's Home State
advanced to or for the direct benefit of the borrower, which fee may be from the drop-down list.
included in the principal balance of the loan;” RCW § 31.04.105(2). The • The home state is the state where the company's main (or home) office is
Encompass Compliance Service applies this CLA maximum lender fee located. The applicable laws of the home state are applied to the loan.
restriction to both first and subordinate lien loans. • If State Licensed Lender - Non Depository Institution (STLIC) was selected
Requested Modification: in step 1, the Home State drop-down list is disabled.
Chapter 2: Compliance Review Setup 14You can also read
