Compliance Audit Settings

This setting is available only for companies that are licensed to order closing documents using the Encompass Docs Solution. In addition, this setting is intended for use with the Encompass Compliance Service which is currently supported in Encompass Banker Edition only.

The Compliance Audit Settings tool allows administrators to select whether their company supports Federal high cost loans (Section 32) and to select the individual states in which the company supports state/local high cost loans. Configure this setting to help ensure compliance with regulations regarding high cost loans and to help prevent users from originating high cost loans for states in which they are not permitted to do so.

Many of the settings on this Compliance Audit Settings screen are also available in the Compliance Review Setup tool. If you are a current Encompass Compliance Service customer, the settings configured in the Compliance Review Setup tool will be applied to this Compliance Audit Settings screen (and vice versa). For non-Encompass Compliance Service users, the ICE Mortgage Technology team will guide you through the process of configuring these Compliance Audit Settings, including mapping fees to specific fields in the Encompass Compliance Service.

To Configure Compliance Audit Settings:

On the left panel in Encompass Settings, click Docs Setup, then click Compliance Audit Settings.
Select a Default Channel option to indicate how your company is handling loan files, such as Brokered or Banked.
Enter one or more email addresses in the Admin Email text box. If a processing error occurs during the loan review due to a fee that was not mapped or was mapped incorrectly, an email alert message will be sent to these email addresses.
1. All fees must be mapped to specific fields in the Encompass Compliance Service in order for the compliance reports to produce complete and accurate results. By default the Encompass Compliance Service uses the mapping configured in the Itemization Fee Management setting.
2. When adding multiple email addresses, separate each one using a comma or semicolon.
Select the Use Encompass Finance Charge Indicator for Unmapped Fees checkbox to enable the loan's APR setting to determine how unmapped fees are categorized by the Encompass Compliance Service.
1. When selected, an unmapped fee will be categorized as Other - Non-Finance Charge (Fee ID 998) if the fee's APR indicator checkbox (field ID SYS.X17) on the 2010 or 2015 Itemization form is not selected.
2. An unmapped fee will be categorized as Other - Finance Charge (fee ID 999) if the fee's APR indicator checkbox on the 2010 or 2015 Itemization form is selected.
If you are a current Encompass Compliance Service customer and have already mapped fees, you can proceed to the next step below. Non-Encompass Compliance Service customers need to work with the ICE Mortgage Technology team to map fees to specific fields in the Encompass Compliance Service before proceeding. For more information about unmapped fees, refer to the Compliance Review Setup help topic.
Select the Run MDIA Check checkbox to include the MDIA review in the loan check. When this checkbox is selected, the MDIA review will be performed on all loans, including investment properties.
1. The MDIA check includes comparisons, tests, functions and calculations based on the Truth In Lending Act and Mortgage Disclosure Improvement Act (MDIA). Specifically, the Encompass Compliance Service recalculates the finance charge amount, amount financed, APR, total of payments, payment schedule, and the amortization schedule. The MDIA check validates that the loan's disclosure dates are in compliance with the "3-7-3 rules" set forth in the MDIA.
Select the tolerance to apply to loan reviews using the APR and Finance Charge Tolerance options.
1. Select 0.125% for all loans to set up the report to note a violation if there is a difference between the disclosed APR and the current APR greater than .125% when reviewing any type of loan.
2. Select the 0.125% for regular loans... option to set up the report to note a violation if there is difference between the disclosed APR and the current APR greater than .125% when reviewing a loan or if there is a difference between the disclosed APR and current APR greater than .25% when reviewing an irregular loan.
More Information about APR and Finance Charge Tolerance
When an APR and Finance Charge Tolerance option is included in the MDIA check, the Encompass Compliance Service does not test for APR over disclosure unless it is configured as part of a Custom Report. In addition, the Encompass Compliance Service does not receive sufficient information to determine whether the APR is closer to the "actual APR" and therefore does not test for tolerances pursuant to 12 C.F.R. § 226.22(a)(5).

Regulation Z defines the "accuracy" of the closed-end APR in 12 C.F.R. § 226.22. As a general rule, the disclosed APR is considered accurate if it is not more than .125% above or below the APR determined in accordance with 12 C.F.R. § 226.22(a)(1). In an "irregular transaction", the APR is considered accurate if it is not more 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 C.F.R. § 226.22(a)(2) and (3)):
- Multiple advances
- Irregular payment periods, or
- Irregular payment amounts (other than an irregular first period or an irregular first or final payment)
Because most creditors and secondary market purchasers prefer a more conservative test, you have the option of using the more restrictive 0.125% for all loans option or applying "the benefit of the 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 liberal test to irregular transactions, the Encompass Compliance Service uses the following criteria to determine the loan's status as irregular:
- A closed-end loan secured by a 1-4 unit dwelling that has:
  - 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
  - Payment periods that are not equal (the first payment period can be different).
If you do not use the Encompass Compliance Service (ECS), select one of the three options from the Run Qualified Mortgage Points and Fees and Higher-Priced Covered Transaction Tests on dropdown list.

This option is only visible to Encompass users who do not use the Encompass Compliance Service. The option is disabled and is not visible to customers who use the Encompass Compliance Service.
To enable users to originate Federal high cost (Section 32) loans, select the Allow Federal High-Cost (Section 32) Loans checkbox.
1. The Encompass Compliance Service calculates the high cost thresholds as defined in HOEPA and by applicable state and local jurisdictions to 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 fees by ascertaining to whom the fee is paid (for example, lender, affiliate, originator, or provider) and by whom the fee is paid.
Select the individual states in which your company supports state/local high cost loans.
Click the Save icon.

Compliance Review

Compliance Review Setup