Compliance
In an ever-evolving regulatory landscape, our ICE Mortgage Technology® team is dedicated to helping lenders stay compliant and deliver loans of the highest quality. We are constantly evaluating upcoming changes and making the necessary updates in Encompass® by ICE Mortgage Technology to help our customers prepare for and make any necessary adjustments without disruption to their business. Below are three top of mind compliance topics that you should be thinking about today, no matter which LOS you are using.
You may already be aware that there is a requirement from Regulation Z stating that fees disclosed on a loan estimate and closing disclosure must be made in good faith. The base line rule is that the amount imposed on the borrower should not increase from the initial disclosure displayed to them. However, those fees can change if you have a valid change circumstance (for example, if a rate-lock changes or expires). In 2022 Supervisory Highlights, the CFPB found that certain lenders failed to sufficiently document the validity of a changed circumstance. To resolve the issue, the CFPB required these lenders to update their policies and change circumstance audit procedures to document at a fee level the reasoning or circumstances for any changes.
We’ve built a process within Encompass to help you manage disclosures at a fee level, so you can sufficiently document changed circumstances that tell the true story of each fee disclosure in a way that meets the Regulation Z requirements. The Encompass Compliance Service™ within the platform also actively monitors fee changes, and Alerts & Messages provide indication of tolerance variances prompting proactive evaluation and action. This gives you the ability to produce Audit Trail documentation to support quality control and external audit needs.
In an ever-changing regulatory and compliance environment, document updates happen regularly and often with little notice. A few recent examples include GSE Uniform Legal Instruments, VA documents and 4506-C forms. Ensuring that your team is informed as early as possible about a document update, the scope of the change and how it might impact your workflow is critical. But it’s not enough to just be aware of the change, you also need to be prepared to implement any required changes in your workflow and support any necessary change management.
Our team at ICE Mortgage Technology utilizes a comprehensive change management program to evaluate changes impacting industry documents and facilitate timely releases to our customers. We keep our customers informed every step of the way, through various channels, including pending release logs, knowledge articles, release notes, outbound communications and targeted communications. Our team is dedicated to helping you stay aware of upcoming changes by quickly analyzing the breadth of new changes as they are released, examining their impact, identifying if new settings or fields are required in Encompass and supporting change management through field and team enablement. The Encompass Docs Solution™ gives users a single source where they can find the current, compliant state and federal mortgage documents they need.
Affordable housing is something that’s top of mind for many homebuyers, and it will continue to be a focus for lenders going forward. Both Fannie Mae and Freddie Mac have taken steps to make it easier for lenders to identify opportunities in their affordable housing programs. Also, many states offer additional help to potential borrowers in the form of down payment assistance (DPA) or closing cost assistance. If you are considering offering DPA loans, which are typically originated with or through a State Housing Finance Agency (HFA), there are a number of things you need to consider. The first step is to decide which states you will offer these types of products in, because each state agency has very specific requirements associated with their loan programs. Next, you’ll need to understand which specific types of down payment assistance products each state offers. They may be zero-interest or zero-pay, fully forgiven or fully amortizing, just to name a few. To gain these details about the programs, as well as to have a contact to send questions to, it’s invaluable to build a strong relationship with that state’s HFA. You have to become an approved lender in every state where you want to offer DPA loans, so having a good contact who can help you understand the variances that each state may have is critical.
In-house, you’ll need to evaluate the eligibility of the borrower and their creditworthiness. Additionally, for underwriting, the requirements are going to vary by state and by loan product. To help your team understand the various requirements, you will need to have training in place. With Encompass, you can document various types of DPA subordinate liens for things like simple interest, zero interest rate or forgivable liens. In the Encompass 23.3 release, we provided some additional enhancements to help lenders efficiently document what makes a loan qualified for affordable housing.
Click here to see more about how Encompass is keeping compliance at the forefront of everything we do. And for our Encompass customers, we’ll be hosting a full track of compliance-related sessions at ICE Experience 2024 for you to take advantage of.
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