Encompass Docs Solution 20.1 Major Release
LIBOR Transition Update
The LIBOR (London Interbank Offered Rate) index, the world’s most widely used benchmark for short-term rates, has experienced numerous cases over the years of traders manipulating the index resulting in organizations paying billions in fines and penalties. As a result, the U.S. and other countries have determined they will discontinue its use. In 2014, the Federal Reserve Board and the New York Fed jointly convened the ARRC, or Alternative Reference Rates Committee, to find an alternative to the LIBOR index and chose the SOFR (the Secured Overnight Financing Rate) index as the replacement.
On February 5, 2020, the FHFA announced the steps that the GSEs will be taking to transition from LIBOR to SOFR. That first step involves the updating of Fannie Mae and Freddie Mac uniform ARM Notes and Riders as published on their respective web sites.
Please note! While these ARM Notes and Riders are being updated within close proximity to the Encompass 20.1 Major Release, they are not dependent upon the release. Lenders will not be allowed to Opt-Out of the updating of these documents, and the updates will occur regardless of which Encompass version is used.
Document Updates to “Fallback” Language
The updated Fannie Mae and Freddie Mac uniform ARM Notes and Riders, which are required for use as of June 1, 2020 by the GSEs, will in turn be updated within the EDS document engine in two phases:
LIBOR-specific Notes and Riders:
- April 4, 2020: scheduled for release to test environments
- May 2, 2020: scheduled for release to production environment
Treasury-specific Notes and Riders:
- April 18, 2020: scheduled for release to test environments
- May 2, 2020: scheduled for release to production environment
There are interest only ARM Notes and Riders in the EDS document library which at one time where published by the GSEs but no longer are. Ellie Mae has continued to support the use of those documents and in turn will apply the associated updates to them.
Lifetime Floor Language
On February 5, 2020, Freddie Mac announced an updated requirement to represent the lifetime floor language by stating that the interest rate will never be “less than ____%”. The ability to generate the notes and riders with this language currently exists in Encompass via field ID ARM.FlrVerbgTyp.
Due to this new requirement, Ellie Mae will be updating plan codes and audit messages to coincide with the “fallback” language release schedule above.
Fannie Special Feature Code
For tracking purposes, SFC 785 must be included in the loan delivery data for loans that are closed on these updated documents. Encompass field ID ULDD.X36 (Investor Feature ID) is intended for this purpose and an EDS audit message will be generated to coincide with the “fallback” language release schedule above, should the above code not be entered.
Freddie Investor Feature Identifier
For tracking purposes, Sellers must enter the valid value of “J23” for ULDD Data Point Investor Feature Identifier for loans that are closed on these updated documents. Encompass field ID ULDD.X179 (Investor Feature ID) is intended for this purpose and an EDS audit message will be generated to coincide with the “fallback” language release schedule above, should the above code not be entered.
LIBOR Transition Support
Ellie Mae has been monitoring the LIBOR transition for some time and will continue addressing the changes that are needed in our products by the June 1, 2020 date. Please refer to the documents and resources on the LIBOR Transition Support page for more information.
