The Encompass Compliance Service (ECS) enables lenders 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. In this blog, we will dive into the different review types in Encompass Compliance Service, exploring the compliance checks completed in each of those reviews.
Review Types in Encompass Compliance Service
TILA/TILA-RESPA Review
- Calculation Precision: ECS meticulously recalculates finance charges, APR, and payment schedules, ensuring compliance with the Truth In Lending Act and Mortgage Disclosure Improvement Act.
- MDIA Validation: The MDIA test validates disclosure dates, a critical aspect governed by the “3-7-3 rules,” offering flexibility with optional Total of Payments Tolerance and MDIA test exclusion.
TILA-RESPA Review
- Post-2015 Compliance: Tailored for closed-end loans post-October 3, 2015, ECS ensures adherence to TILA-RESPA Rules, with a nuanced approach even when information is insufficient.
TILA Right of Rescission Review
- Timing Precision: Focused on non-purchase money closed-end loans, ECS scrutinizes timelines, comparing disclosed right-to-cancel expiration dates and loan disbursement dates for regulatory compliance.
HOEPA Review
- High-Cost Classification: ECS delves into compliance with HOEPA and local regulations, carefully calculating high-cost thresholds to ensure accurate fee classification.
Higher Priced Mortgage Review
- Threshold Calculations: ECS calculates thresholds for “higher priced mortgage loans” (HPML), analyzing prepayment penalties to ensure conformity with Regulation Z.
GSE Review
- Government-Sponsored Compliance: Addressing Fannie Mae and Freddie Mac points and fees, ECS ensures loans align with the guidelines of these pivotal government-sponsored enterprises.
Consumer Credit Review
- State-Specific Adherence: Applying over 340 state laws, ECS enforces usury rate ceilings, fee limitations, and other state-specific regulations for consumer residential mortgage loans.
HMDA Review
- Pertinent Evaluation: ECS evaluates loan data against Home Mortgage Disclosure Act (HMDA) requirements, processing FFIEC Validity and Quality edits for a thorough compliance check.
Rate Spread Review
- APR Transparency: Focused on HMDA Rate Spread, ECS alerts lenders to APR differences exceeding specified thresholds, promoting transparency in reporting.
FHA, Citi Mortgage Rules, VA, LO Compensation Reviews
- Regulatory Precision: Covering areas like seller contributions, tax service fees, and loan origination limitations, these reviews ensure compliance with FHA, CitiMortgage, VA, and LO Compensation regulations.
NMLS Registration Review
- Originator Verification: ECS verifies loan originator information against NMLS data, providing warnings or failures for discrepancies and ensuring accurate representation.
Ability to Repay/Qualified Mortgage Review
- CFPB Adherence: Aligning with CFPB regulations, this review checks loans for compliance with ability-to-repay requirements, offering detailed reports on rate thresholds, fee assessments, and discount points.
Flood Zone Enterprise Rule
- Insurance Alignment: ECS checks for flood zone status, alerting lenders if a Flood Insurance Reserve charge is missing, promoting adherence to insurance requirements.
Licensing Tests
- Nationwide Verification: Utilizing a nationwide database, ECS verifies the licensing status of mortgage entities, ensuring the lender is authorized, active, and in good standing.
Looking for more information on review types in Encompass Compliance Service (ECS) or need help with implementing any technology solution within Encompass, leave us a message.
