In this article, we will be discussing about the Mavent Compliance Service (MCS) which is an additional feature in Encompass 360.
Mavent Compliance Service
- is also called Encompass Compliance service.
- offers leading residential mortgage lending businesses an enterprise solution that ensures loans comply with federal and state regulatory compliance requirements, as well as investor requirements.
- enables you 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.
- Mavent reviews are performed in real time via an interactive interface. Mavent reviews are automatically triggered by client-defined status changes to the loan file (e.g., submission to underwriting, drawing documents, funding, etc.).
The advantages the Mavent Compliance Service offers to mortgage lending institutions include:
- Compliance Risk Assessment and Management
- Consumer Credit Law Expertise
- Technology Expertise
Compliance Risk Assessment and Management
- Mavent’s independent review validates the effectiveness of the regulatory compliance component of an institutionalized risk management program.
- Provides a centralized, external, and uncorrupted compliance review of all production activity for institutions with multiple business lines and disparate systems. The reviews provide independent checks to mitigate risks resulting from changes to loan programs and modifications to a LOS.
- Automated reviews give management the ability to deploy robust compliance controls consistently and rapidly across all products and business channels prior to a loan’s close or purchase.
- Customizable management reporting tools provide real-time risk oversight, allowing compliance resources to be focused on corrective action and cures before a transaction is closed and a liability potentially incurred.
- Mavent indemnifies clients against losses arising from fines and regulatory civil money penalties associated with reviews performed by the MCS.
- The rule base used by the MCS is reviewed and approved by leading, nationally recognized consumer finance law firms specializing in mortgage compliance.
- Mavent’s in-house attorneys collaborate with its outside counsel experts to continuously identify and interpret all relevant laws, regulations, court opinions, official interpretations and regulatory trends for every U.S. jurisdiction.
- A “consensus” approach to the rule development process ensures that legal interpretations are accurate and well-reasoned.
- Mavent’s rules are maintained with commencement and expiration dates allowing seasoned loan reviews or enabling forward date testing of loans to understand a new law’s impact on production.
Mavent Compliance Service Review Types
1 – Ability-to-Repay/Qualified Mortgage Review
The Mavent Compliance Service will apply rules to determine whether the loan meets ability-to-Repay requirements and whether a Qualified Mortgage meets the applicable requirements based on the type of Qualified Mortgage being made (i.e. General Qualified Mortgage, Agency/GSE Qualified Mortgage, FHA Qualified Mortgage, VA Qualified Mortgage, USDA/RHS Qualified Mortgage, Small Creditor Qualified Mortgage, Balloon Payment Qualified Mortgage, or Small Creditor Balloon-Payment Qualified Mortgage).
- Section 43 Higher Priced Covered Transaction – The MCS applies the 12 CFR § 1026.43 Higher-Priced Covered Transaction threshold to non-exempt loans and indicates that the loan is a “safe harbor” loan if the threshold is not exceeded.
- Loan Terms/Loan Features – The MCS applies rules restricting the loan term, amortization term, interest only term, negative amortization, and balloon payments, according to the type of Qualified Mortgage being made.
- Qualified Mortgage Points and Fees Limit – The system applies the Qualified Mortgage points and fees limit, either as a dollar amount or a percentage of the Total Loan Amount, depending on the note amount of the loan being made.
- Underwriting Factors – For ATR Standard loans, the Mavent Compliance Service will apply rules confirming the consideration and evaluation of the Monthly Covered Loan Payment, Monthly Simultaneous Loan Payment (if applicable), Monthly Mortgage Related Obligations, Debt Obligations, Child Support and Alimony Obligations (if applicable), Current Employment Status, Current or Expected Income, Current or Expected Assets, Credit History, DTI Ratio, and Residual Income.
- For General Qualified Mortgage loans – the MCS will apply a 43% DTI limit to safe harbor loans. The MCS will apply a 43% DTI limit and the VA residual income threshold to presumption of compliance (Higher Priced Covered Transaction) loans.
- Agency/GSE Eligibility – The MCS will apply rules confirming an Agency/GSE Qualified Mortgage, FHA Qualified Mortgage, VA Qualified Mortgage, or USDA/RHS Qualified Mortgage has an appropriate AUS recommendation to indicate the loan is eligible for purchase or guaranty by an agency or GSE. If the loan does not have such a recommendation, the MCS will apply rules to confirm the loan is either in compliance with GSE/Agency written standards at consummation, has a written agreement permitting variation from GSE/Agency standards, or has a loan waiver granted by a GSE/Agency. For a VA Qualified Mortgage that is an Interest Rate Reduction Refinancing Loan, the MCS will apply rules to ensure the loan is eligible for Safe Harbor status, including a 3% QM points and fees threshold, a 41% DTI threshold, a VA + 20% residual income threshold, and additional rules to enforce timing requirements related to the refinancing, and restrictions on making such refinances when the borrower has late payments.
2- Truth in Lending (TILA)/ RESPA Review
The Mavent Compliance Service contains four separate reviews related to the federal Truth in Lending Act:
- TILA/RESPA Review – Mavent recalculates and verifies various disclosures that are required in the new Loan Estimate and Closing Disclosure documents and tracks disclosure delivery to ensure timing requirements are met.
- TILA Tolerance – Mavent recalculates the following amounts and schedules based on the loan data submitted to the MCS to determine if the loan is within the permissible Finance Charge Tolerances ($35 and $100) and APR Tolerance (1/8 of 1%, 1/4 of 1% for “irregular loans”).
- Finance Charge Amount
- Annual Percentage Rate (APR)
- Payment Schedule
- Amount Financed
- Total of Payments
- Amortization Schedule
- TILA Right of Rescission – Mavent validates that the rescission period for the loan follows Truth in Lending timing requirements by comparing the Loan Disbursement
Date to the latest of the following dates provided in the loan data submitted to the Mavent Compliance Service:
1 ) Document Sign Date
2) Last Disclosure Date
3) Payment Schedule
4) Right of Rescission Expiration Date
5)HOEPA Disclosure Date (if applicable)
The Mavent Compliance Service will apply a RESPA Regulation X comparison for charges in the GFE and HUD-1 and indicate whether the tolerance has been exceeded for the fees that can change by 10% in aggregate and the fees that cannot change. The Mavent Compliance Service will return a warning message if the loan exceeds a tolerance and the loan is still within the period in which the tolerance violation can be cured.
3 – TILA MDIA (Mortgage Disclosure Improvement Act)
The Mavent TILA Tolerance TRID Disclosure review performs re-calculation and verification of certain disclosed values from the Loan Estimate and Closing Disclosure, as listed below, and tracks disclosure delivery to ensure timing requirements are met:
Disclosure Timing Rules
• Loan Estimate Mailed/Delivered Within Three Business Days of Application
• Prior Loan Estimate Received At Least Four Business Days Before
• Loan Estimate Disclosure Date on or after Closing Disclosure Date
• Closing Disclosure Received at Least Three Business Days Before Consummation Date
• Inaccurate Loan Product – Redisclosure and Waiting Period
• Inaccurate Closing Disclosure APR – Redisclosure and Waiting Period
• Prepayment Penalty Added – Redisclosure and Waiting Period
Loan Comparison/Loan Calculation Rules
• Closing Disclosure Total Interest Percentage (TIP)
• APR Disclosure Tolerance (Regular)
• APR Disclosure Tolerance (Irregular)
• Finance Charge Disclosure Tolerance (Closing Disclosure or Loan Estimate)
• Foreclosure Rescission Finance Charge Tolerance (Closing Disclosure)
• Finance Charge Rescission Tolerance (Closing Disclosure)
4- Federal (HOEPA), State & Local High Cost Threshold Tests
The Mavent Compliance Service calculates the high cost thresholds as defined in Federal 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 (e.g., lender, affiliate, originator or provider) and by whom the fee is paid. Historical rules, indices and information are preserved to enable a retrospective quality control audit. As of June 2014, Mavent conducts high threshold tests under Federal HOEPA and twenty-nine state high cost statutes. In addition, in two states (Illinois and Rhode Island), Mavent applies high cost tests under local high cost/predatory lending ordinances. Because zip codes and city names do not precisely identify whether a specific property is subject to a local ordinance, Mavent determines the proper local jurisdiction of the property by utilizing geocoding to identify the standard address.
5- Federal Higher-Priced Mortgages
Mavent calculates thresholds and ensures critical regulatory requirements are met with respect to the Federal Higher-Priced Mortgages. The Mavent Compliance Service calculates the higher priced mortgage thresholds as defined in 12 C.F.R. § 1026.35(a)(1) to determine if a loan is considered a higher-priced mortgage. If the transaction is considered a Federal Higher-Priced Mortgage, the MCS will perform an analysis of the following loan terms to determine whether they are prohibited practices:
• Prepayment Penalty
• Ability to Repay (optional Enterprise Rule evaluation
• Escrow Account Requirements
6- Broker and Lender Licensing Verification
The Broker and Lending Licensing Verification review ensures that
1) all parties to a transaction are properly licensed.
2) the licenses are active and current.
3) the licenses are appropriate to the reviewed loan type and jurisdiction and
4) as an Enterprise Rule (see the “16 – Client Customization” section on page 8), as part of Mavent’s licensee monitoring service, the MCS can verify that the licensee is approved for business by the client.
7- NMLS Registration Review
The MCS Nationwide Mortgage Licensing System (NMLS) Registration review verifies an individual loan originator’s information against data received from NMLS B2B Access. The NMLS Registration Review provides results based on the current NMLS registration data.
The MCS NMLS Registration review verifies that:
• The individual loan originator’s NMLS unique identifier is a valid number.
• The individual loan originator’s name matches the registered name(s) associated with the NMLS unique identifier.
At least one of the licenses registered under the individual loan originator’s NMLS unique identifier is authorized to conduct business in the property state for the loan transaction.
8- Mavent State Consumer Credit Law Review
The MCS State Consumer Credit Law review covers all U.S. jurisdictions. State consumer credit law is applied in accordance with
1) the client’s lending authority (charter, license, or exempt status),
2) the client’s Lender Profile (including exportation choices and statutory elections) and
3) custom Client Positions. Historical rules, indices and information are preserved to enable retrospective quality control auditing.
9- Loan Originator Compensation
The MCS Loan Originator Compensation review includes rules which address payments to loan originators, including mortgage brokers and loan officers, based upon the terms or conditions of the loan, other than the amount of credit extended. It also contains rules on dual compensation.
The MCS provides real-time analysis of Home Mortgage Disclosure Act data so that the client can easily identify invalid or incongruent information. The MCS HMDA feature enables loan processors to make corrections at the time of final disposition, thus eliminating the year-end manual “scrubbing” of data.
The Geocoding component verifies that the census tract, Federal Information Processing Standards (FIPS) for the state, county FIPS, Metropolitan Statistical Area (MSA) and property address information are accurately reported.
11 – GSE Requirements
- Applies a 5% limit to points and fees (as defined by Regulation Z, 12 CFR § 1026.32) for loans that are not subject to TILA or are exempt from the ability-torepay requirements in Reg Z 1026.43(a) or (d) as indicated in the Fannie Mae Single Family Selling Guide, Part B, Subpart 2, Chapter 1
- Applies a 5% limit to points and fees (as defined by Regulation Z, 12 CFR § 1026.32) for that are not subject to TILA or are exempt from the ability-to-repay requirements in Reg Z 1026.43(a) or (d) as indicated in the Freddie Mac Single Family Seller/Servicer Guide, Chapter 22:37
12 – OFAC/SSN
The MCS OFAC review module alerts clients to possible customer identification issues or problems.
Verifies Borrower/Co-Borrower Identity
The MCS OFAC review performs the following Social Security Number verifications:
• Verifies that borrower/co-borrower SSN does not belong to a deceased individual per the government Death Master File (DMF)
• Verifies that the SSN is not a pocketbook number
13 – FHA Enterprise Review
The FHA Enterprise review evaluates FHA loans and identifies issues in the following areas:
• MSA Loan Limits
• Late Charge and Grace Period • Prepayment Penalty
• ARM Loans
• Loan Terms
• Tax Service Fees
• Seller Contributions
14 – VA Enterprise Review
The VA Enterprise review evaluates VA loans and identifies issues in the following areas:
• Late Charge and Grace Period
• Loan Origination Fees
• Discount Points
• Itemized Fees
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