Fee Variance Worksheet

White Paper: Fee Variance Violated Alert Scenarios

Use the Fee Variance Worksheet to view differences between fees currently entered on the 2015 Itemization form, fees disclosed on the Loan Estimate, and fees disclosed on the Closing Disclosure. The Fee Variance Worksheet is populated when the initial Loan Estimate is disclosed to the borrower. It is updated when fees change on the 2015 Itemization, when the Closing Disclosure is disclosed, and when the Loan Estimate or Closing Disclosure are redisclosed.

Use the first five sections of the worksheet to identify potential tolerance violations by viewing differences between disclosed fees and fees that have since been updated on the 2015 Itemization. When all disclosures have been sent to the borrower and the loan is ready to close, the Tolerance Cure section at the bottom of the of the worksheet calculates any variance that exceeds the tolerance limit and provides fields where you can enter the amount applied toward the cure and describe how the cure was addressed.

Note that in Encompass 18.3, the Fee Variance Worksheet was enhanced with new logic that determines fee by fee (instead of only by disclosure as in earlier versions of Encompass) whether a fee variance will impact the LE and CD baseline calculations based on if the changed circumstance occurred for a valid reason or invalid reason. If the reason is valid, the fee amount will be included in the applicable baseline calculation. If the reason is invalid, the fee amount will not be included.

The LE and CD baseline fields are provided in each section of the Fee Variance Worksheet and calculated accordingly for each section:

Variance between LE and Itemization
Difference between LE and CD (Disclosed)
Variance between CD and Itemization

As part of the new fee-level Change of Circumstance workflow, each fee variance will be captured with a reason code. There can be only one reason code per fee. If multiple fees make up one line item on the 2015 Itemization, each fee within the line item will be evaluated individually. The reasons that are considered valid or invalid have not changed from earlier versions of Encompass.

Note if a reason for the change of circumstance is not provided, it is considered an invalid reason. This fee by fee logic is applied only when the new Fee Level Disclosures checkbox (field ID 4461) above the changed circumstance reasons on the Loan Estimate (LE) Page 1 and Closing Disclosure (CD) Page 1 input forms is selected.

Fees Categorized by Variance Limits

The first four sections of the worksheet display fees in categories based on the variances allowed for each category of fees:

Items that Cannot Decrease
Charges that Cannot Increase
Charges that in Total Cannot Increase More Than 10%
Charges that Can Change

Each section includes a list of fees in the category. Use the columns described below to compare fee amounts on the 2015 Itemization, Loan Estimate, and Closing Disclosure:

Itemization # – The line number of the fee on the 2015 Itemization.
Initial LE - The fee amount disclosed on the initial Loan Estimate or on a redisclosed Loan Estimate for which the borrower has indicated an intent to proceed.
LE Baseline – The fee amount from the Loan Estimate that is being used as the baseline for comparing differences and establishing variances with the 2015 Itemization and Closing Disclosure. If more than one Loan Estimate has been disclosed, different Loan Estimates may be used to set the LE Baseline fees in different fee categories. In each section, the top of the LE Baseline column displays the date of the Loan Estimate used to populate the LE Baseline values in the section.

CD Baseline – The fee amount from the most recently disclosed Closing Disclosure that is being used as the baseline for comparing differences and establishing variance amounts with the 2015 Itemization and the Loan Estimate. When there is no difference in a section between fees disclosed in the Loan Estimate and the Closing Disclosure, LE Baseline Used displays at the top of the CD Baseline column. When there is a difference, the date of the Closing Disclosure displays.

Itemization – The fee amount currently entered on the 2015 Itemization.

Click the Find icon at the top of the LE Baseline column and the CD Baseline column (when appropriate) to view read-only data from the disclosed Loan Estimates and Closing Disclosures for the loan.

View disclosed Loan Estimates

View disclosed Closing Disclosures

Items that Cannot Decrease

This section lists the credits that are not allowed to decrease without an appropriate change in circumstance.

Lender Credit is populated to the LE columns when the Loan Estimate is disclosed. The LE columns are updated if the Loan Estimate is redisclosed due to a changed circumstance caused by a rate lock change as indicated in the Disclosure Tracking tool by selecting the Interest Rate dependent charges (Rate Lock) checkbox on theReasons tab in the disclosure’s Disclosure Details window.
Lender Credit is populated to the CD Baseline column when the Closing Disclosure is disclosed.
When a Loan Estimate or Closing Disclosure is disclosed with decreased total lender credits and the Other option (field ID LE1.X84 on the Loan Estimate Page 1 or field ID CD1.X59 on the Closing Disclosure Page 1) is selected as the only reason for redisclosing, the LE Baseline and CD Baseline amounts in the Items that Cannot Decrease section are not updated with that information.
When a Closing Disclosure is redisclosed with decreased total lender credits and the Change in Settlement Charges option (field ID CD1.X55) is selected as the only reason for redisclosing, the CD Baseline amounts in the Items that Cannot Decrease section are not updated with that information.

Fields at the bottom of the section display the following information for the total fee amounts for items that cannot decrease:

Variance between LE and Itemization - The difference between the two amounts when the Total Lender Credit in the Itemization column is less than the Total Lender Credit in the LE Baseline column.
Difference between LE and CD (Disclosed) - The difference between the two amounts when the Section J Credit (Disclosed) amount in the CD Baseline column is less than the Section J Credit (Disclosed) amount in the LE Baseline column.
Variance between CD and Itemization - The difference between the two amounts when the Total Lender Credit in the Itemization column is less than the Total Lender Credit in the CD Baseline column.

The variance for the Items that Cannot Decrease section applies to the total amount for items in the section, not to the individual line entries. Individual line entries can change, but there is no variance if the total amount for the section does not decrease.

Charges that Cannot Increase

The fees listed here cannot increase by any amount without an appropriate change in circumstance.

Fees in the Charges that Cannot Increase section are updated when the Loan Estimate or Closing Disclosure is disclosed (or redisclosed).
When a Loan Estimate or Closing Disclosure is redisclosed with increased fees in this section and the Other option (field ID LE1.X84 on the Loan Estimate Page 1 or field ID CD1.X59 on the Closing Disclosure Page 1) is selected as the only reason for redisclosing, the LE Baseline and CD Baseline amounts in this section are not updated with that information.
When a Loan Estimate or Closing Disclosure is redisclosed when increased transfer taxes are the only fee increases in this section and the Interest Rate dependent charges (Rate Lock) option (field ID LE1.X81 on the Loan Estimate Page 1 or field ID CD1.X67 on the Closing Disclosure Page 1) is selected as the only reason for redisclosing, the LE Baseline and CD Baseline amounts in this section are not updated with that information.

Fields at the bottom of the section display the following information:

Good Faith Baseline - The total amount for charges that cannot increase in each column.
Baseline Adjustment - Free entry fields that allow users to adjust the LE Baseline and CD Baseline values. Use this field to adjust the baseline and variance amounts to compensate for hitchhiker fees. Hitchhiker fees are fees that have increased since the previous disclosure, but that you plan to remedy at a later time. If a redisclosure is issued for another reason, the hitchhiker fees are also redisclosed and the baseline is adjusted for the fees in this section, even though the variance for the fees has not yet been remedied. By entering the variance amount in the Baseline Adjustment fields, you can adjust the amounts in the related fields. Entering a Baseline Adjustment amount in the LE Baseline column reduces the Net Good Faith Baseline for the LE Baseline and increases the Variance Between LE and Itemization by the same amount. Entering Baseline Adjustment amount in the CD Baseline column reduces the Net Good Faith Baseline for the CD Baseline by the same amount.
Net Good Faith Baseline - The Good Faith Baseline minus the Baseline Adjustment. The total amount for charges that cannot increase in each column, adjusted for the Baseline Adjustment when appropriate.
Disclosed Amount - The total of the last disclosed amounts for the line items in this section for the Initial LE, LE Baseline, and CD Baseline columns.
Variance between LE and Itemization - For fees that cannot increase, the difference between the two amounts when the fees currently listed on the 2015 Itemization exceeds the total for fees listed in the LE Baseline's Itemization snapshot.
Difference between LE and CD (Disclosed) - The difference between the Disclosed Amount in the LE Baseline and CD Baseline columns.
Variance between CD and Itemization - For fees that cannot increase, the difference between the two amounts when the total for fees currently listed on the 2015 Itemization exceeds the total for fees listed in the CD Baseline's Itemization snapshot.

Charges that in Total Cannot Increase More Than 10%

This section lists the fees that cannot increase by more than 10% in total. These rows are populated with line items from the 2015 Itemization for services that the borrower is allowed to shop for, but has opted not to shop for, and that are marked as Paid to Seller or Paid to Other.

The LE columns are populated the first time the Loan Estimate is disclosed
The LE columns are updated when the Loan Estimate is redisclosed, if the Variance Amount (10%) field has a value greater than 0. If the Variance Amount (10%) field has a value of 0 or less, then the LE column is not updated in this section and maintains its existing values.
When a Loan Estimate or Closing Disclosure is redisclosed with fees exceeding the 10% tolerance limit in this section, and the Other option (field ID LE1.X84 on the Loan Estimate Page 1 or field ID CD1.X59 on the Closing Disclosure Page 1) is selected as the only reason for redisclosing, the LE Baseline and CD Baseline amounts in this section are not updated with that information.

Fields at the bottom of the section display the following information:

Good Faith Baseline - Total of the individual fee amounts listed in the Initial LE, LE Baseline, CD Baseline, and Itemization columns.
BaselineAdjustment - Free entry fields that allow users to adjust the LE Baseline and CD Baseline values. Use this field to adjust the baseline and variance amounts to compensate for hitchhiker fees. Hitchhiker fees are fees that have increased since the previous disclosure, but that you plan to remedy at a later time. If a redisclosure is issued for another reason, the hitchhiker fees are also redisclosed and the baseline is adjusted for the fees in this section, even though the variance for the fees has not yet been remedied. By entering the variance amount in the Baseline Adjustment fields, you can adjust the amounts in the related fields. Entering a Baseline Adjustment amount in the LE Baseline column reduces the Net Good Faith Baseline for the LE Baseline and increases the Variance Between LE and Itemization by the same amount. Entering Baseline Adjustment amount in the CD Baseline column reduces the Net Good Faith Baseline for the CD Baseline by the same amount.
Net Good Faith Baseline - The Good Faith Baseline minus the Baseline Adjustment. The total amount for charges that cannot increase in each column, adjusted for the Baseline Adjustment when appropriate.
Legal Limit (Baseline + 10%) - The Good Faith Baseline amount in the Initial LE, LE Baseline, CD Baseline, and Itemization columns multiplied by 1.1 (the sum of all fees in each column plus 10%).
Disclosed Amount - The total of the last disclosed amounts for the fees in the Initial LE, LE Baseline, and CD Baseline columns.
Variance between LE and Itemization - The difference between the two amounts when the Good Faith Baseline amount in the Itemization column is larger than the Legal Limit (Baseline + 10%) amount in the LE Baseline column.
Difference between LE and CD (Disclosed) - The difference between the Disclosed Amount in the LE Baseline and CD Baseline columns.
Variance between CD and Itemization - The difference between the two amounts when the Good Faith Baseline amount in the Itemization column is larger than the Legal Limit (Baseline + 10%) amount in the CD Baseline column.

Note: The variances and legal limit for the Charges that in Total Cannot Increase More than 10% section apply to the total fee amount rather than individual fees. For example, if the total for all fees in the section was disclosed as $500 on the Loan Estimate, total fees for the section would have to exceed $550 to be considered a tolerance violation. Individual fees in the section can increase by more that 10% as long as the total for all fees in the section does not exceed 10% of the total amount disclosed on the Loan Estimate.

Charges that Can Change

This section lists the fees that can change without any reason, including the Initial Deposit for Escrow, the Per Diem Interest, and 2015 Itemization line items from the 900, 1000, 1100, and 1300 section for services that the borrower opted to shop for and that are marked as Paid To Seller or Paid to Other.

Fields at the bottom of the section display the following information:

Difference between LE and Itemization - The difference between the LE Baseline and Itemization column totals.
Difference between LE and CD - The difference between the LE Baseline and CD Baseline column totals.
Difference between CD and Itemization - The difference between the CD Baseline and Itemization column totals.

Total Good Faith Amount

This section displays the following fee totals:

The amounts recorded in the 2015 Itemization, Loan Estimate, and Closing Disclosure for the total fees in each of the following three categories:
Items that Cannot Decrease
Charges that Cannot Increase
Charges that in Total Cannot Increase More Than 10%
Good Faith Amount (Charges)
Good Faith Limit

Fields at the bottom of the section display the following information:

Variance between LE and Itemization - The total of the Variance between LE and CD fields in the sections for Items that Cannot Decrease, Charges that Cannot Increase, and Charges that in Total Cannot Increase More Than 10%.
Difference between LE and CD (Disclosed) - The total of the Difference between LE and CD (Disclosed) fields in the sections for Items that Cannot Decrease, Charges that Cannot Increase, and Charges that in Total Cannot Increase More Than 10%.
Variance between CD and Itemization - The total of the Variance between CD and Itemization fields in the sections for Items that Cannot Decrease, Charges that Cannot Increase, and Charges that in Total Cannot Increase More Than 10%.

Fees That Could Be Included in More Than One Section

Some fees could potentially be listed in several sections. For example, if a borrower can shop for a fee, the fee would be listed in a different variance section depending on whether or not the borrower opts to shop for the service. These fees are populated into sections based on the following circumstances:

If only the Loan Estimate has been disclosed, the fee is categorized based on the 2015 Itemization selections made when the Loan Estimate was disclosed.
If the Closing Disclosure has been disclosed, the fee is categorized based on the 2015 Itemization selections made when the Closing Disclosure was disclosed.
As the Loan Estimate and Closing Disclosure are disclosed to the borrower (or when these disclosures are included in or excluded from the timeline in the Disclosure Tracking Tool) fees can move between sections. In particular, services that borrowers can shop for can move between sections based on whether the borrower decides to shop for the service and the party to whom the fee is being paid.

Example of how Borrower can shop for fees move between sections

This example describes how the Title Closing Fee on line 1102b can move between sections on the Fee Variance Worksheet. The Borrower can shop for checkbox is selected in the Fee Details window before the fee is disclosed on the Loan Estimate.

Note: This is a scenario for a specific fee. Other fees may or may not move between sections during the disclosure process.

If the Paid to selection for the fee is blank, Lender, Investor, Affiliate,or Broker, the fee is listed in the Charges that Cannot Increase section.
f the Paid to selection for the fee is Other or Seller, the fee is listed in the Charges that in Total Cannot Increase by More Than 10% section.
As long as the Borrower did shop for checkbox is not selected, the fee remains in the same section described above when the Closing Disclosure is disclosed.
If the Borrower did shop for checkbox is selected later:
If the Paid to selection for the fee is blank, Lender, Investor, Affiliate,or Broker, the fee is listed in the Charges that Cannot Increase section.
If the Paid to selection for the fee is Other or Seller, the fee is listed in the Charges that Can Change section.
When a fee moves to a different section:
The existing entry is retained. Any values that were previously disclosed in the Initial LE, LE Baseline, and CD Baseline columns remain unchanged, but the value in the Itemization column is set to 0 to indicate that the fee was moved to a different section.
A new entry is created in the section to which the fee was moved. Blank values in the Initial LE, LE Baseline, and CD Baseline columns indicate that the fee was added to the section based on the options currently selected in the Fee Details window on the 2015 Itemization, but the fee was not included in the disclosures that display a blank value.
If a fee is removed from the 2015 Itemization altogether, the existing entry is retained, but the values in the Initial LE, LE Baseline, and CD Baseline columns are all set to 0, and the Itemization column is blank.

Fees Added After Sending Disclosures

When a fee is added to the 2015 Itemization after the Loan Estimate has been disclosed:

A new entry is created in the Fee Variance Worksheet.
The options selected in the Fee Details window determine the section in which the fee is listed.
The information currently entered in the 2015 Itemization is used to populate the fee description and the Itemization column fee amount.
Blank values in the Initial LE, LE Baseline, or CD Baseline columns indicate that the fee was added to a section based on options selected in the 2015 Itemization, but was not included in the disclosures that display a blank value.

Tolerance Cure

The Tolerance Cure section displays the amount of a required tolerance cure and provides fields where you can enter information about how the tolerance cure was resolved.

To Record the Cure:

Enter the Applied Cure Amount.
When a tolerance cure is being applied as a lender credit, enter the amount in the Cure applied to Lender Credit field. This field was introduced in the Encompass 18.3 major release.
When a tolerance cure is being applied as a post-consummation principal reduction paid outside closing (POC), enter the amount in the Cure applied to Principal (POC) field (field ID FV.X397). This field was introduced in the Encompass 18.3 major release.
Select or type the Date when the tolerance violation was cured.

The Resolved by field is automatically populated with the Encompass user name of the individual who enters the amount.

Enter a description of the cure in the Comments field.