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Higher Rates Did Not Deter Millennials

Summer temperatures and higher rates appeared to have little effect on the Millennial homebuying market, according to August data from the Ellie Mae Millennial Tracker. Conventional loans remained steady at 64 percent of all closed loans by this generation, while FHA mortgages stayed at 32 percent—a market share they have held since June. The average loan amount for loans closed by Millennial borrowers in August of 2017 was $185,919, a slight increase from August 2016’s average $184,113, despite the average 30-year note rate having increased to 4.211 percent from 3.706 percent last year.

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In August 2017, the average Millennial primary borrower was a 29.4-year-old who took out a Conventional loan of $185,919 to purchase a home with an average appraised value of $223,882. This average homebuyer had a FICO score of 724, which helped them get a 30-year note rate of 4.211 percent, and they closed on their home in 44 days. The majority (64 percent) of primary borrowers were male. Additionally, more than half (52 percent) of borrowers were married.

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On the West coast, the average Millennial borrower was slightly older, at 30.6 years old, taking out a loan of $314,579 on average. Average loan amounts were lower in the Midwest, with homebuyers of age 29.5 closing loans averaging $158,584 in Kansas, for example. In Hawaii, borrowers of 31.4 years took out loans averaging $396,766.

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Overall, Millennials were most likely to close loans for the purpose of purchasing a home (87 percent). Refinances accounted for 12 percent of loans closed by Millennials in August.

“Average loan amounts in August of this year were slightly higher than last year, despite higher interest rates,” said Joe Tyrrell, executive vice president of corporate strategy for Ellie Mae. “As tends to happen with tight inventories, this is a seller’s market, and many of today’s homebuyers may be faced with paying a premium for the same home they might have bought for less last year. For those who are committed to buying a home, though, slight increases in competition, costs or interest rates will likely not deter them.”

Other key findings from the August 2017 Ellie Mae Millennial Tracker include:

The top five markets where Millennial borrowers represented the highest percentage of homebuyers in August were Lima, Ohio, Batavia, N.Y., Dyersburg, Tenn., Roswell, N.M., and Kendallville, Ind.

Female homebuyers increased their purchase power, with closed loans in August averaging $189,574, up significantly year-over-year from $184,094. Males took a slightly smaller jump, averaging $196,246 in August 2017, versus $194,913 last year.

The metropolitan region with the largest percentage of female homebuyers (63 percent) was Mankato, Minn., with an average loan amount of $136,597 and average borrower FICO score of 723.

Males made up 60 percent of the Millennial market in Lima, Ohio, with loans averaging $86,845 and averaging borrower FICO scores coming in at 725.

The Ellie Mae Millennial Tracker is an interactive online tool that provides access to up-to-date demographic data about this new generation of homebuyers. It mines data from a robust sampling of approximately 80 percent of all closed mortgages dating back to 2014 that were initiated on Ellie Mae’s Encompass all-in-one mortgage management solution.

About The Author

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

Refinances Remain Steady With Slight Uptick In Interest Rates

The percentage of refinances remained steady at 35 percent of total loans, despite a slight uptick in interest rates according to the August Origination Insight Report from Ellie Mae. Additionally, overall closing rates climbed to 71.7 percent, the highest since January of 2017 and up from 70.6 percent in July.

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“As the summer season drew to a close, refinances held steady at 35 percent of all closed loans coupled with a slight increase in interest rates to 4.27, up from the 2017 low of 4.25 in July,” said Jonathan Corr, president and CEO of Ellie Mae.

Other statistics of note in August included:

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>>The percentage breakdown of all closed loans remained steady for the third consecutive month with conventional loans representing 64 percent of all closed loans, FHA loans representing 22 percent of all closed loans, and VA loans representing 10 percent of all closed loans.

>>While the average FICO score on all closed loans remained steady at 724 in August, average FICO scores for FHA refinances increased three points to 649. The average FICO score for conventional purchase loans decreased to 752 in August and FICO scores for VA refinances increased two points to 702, up from 700 in July.

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>>Closing time for all loans fell to 42 days in August. Time to close a refinance decreased to 41 days, down from 42 days the month prior. Time to close a purchase loan remained at 43 days in August.

The Origination Insight Report mines data from a robust sampling of approximately 80 percent of all mortgage applications that were initiated on the Encompass all-in-one mortgage management solution.

In addition to the Origination Insight Report, Ellie Mae also distributes data from its monthly Ellie Mae Millennial Tracker on the first Wednesday of each month. The Ellie Mae Millennial Tracker focuses on mortgage applications submitted by borrowers born between the years 1980 and 1999.

About The Author

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

Integration Speeds Up The Process

QuickInsured, an independent insurance agency specializing in the mortgage industry, announced that its homeowners insurance quote service is now available through Ellie Mae’s Encompass. The seamless integration allows lenders to order QuickInsured’s solutions directly through Encompass to drive quality and efficiency in the loan origination process.

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Obtaining home insurance quotes and selecting a carrier is often a time-consuming process for consumers, and can complicate and delay mortgage closings. QuickInsured offers an automated solution that enables borrowers to receive an instant home insurance quote while finalizing the terms of their loan. With the integration, Encompass users are now able to expedite this process for their borrowers so quotes are delivered in seconds. The technology is device agnostic, so on-the-go borrowers can easily generate and bind their quote from a handheld device.

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Ellie Mae is a provider of on-demand software solutions and services for the residential mortgage industry. Ellie Mae’s Encompass all-in-one mortgage management solution provides one system of record that enables banks, credit unions and mortgage lenders to originate and fund mortgages and improve compliance, loan quality and efficiency.

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“QuickInsured is delighted to partner with Ellie Mae,” said QuickInsured CEO, Jerry Batt. “Our secure, seamless integration with Encompass enables our clients to simplify the process of ordering and securing homeowners insurance for borrowers, so they can more efficiently process mortgage loans and grow their business. We look forward to a long, successful relationship with Ellie Mae.”

Batt added, “It’s imperative that mortgage companies to find ways to reduce closing times with loan origination costs on the rise. The time it takes for a borrower to manually receive homeowners insurance quotes and decide on a policy can delay closings, causing headaches for both the borrower and the originator. QuickInsured developed a product to relieve the stress this can cause by enabling borrowers to receive a competitive, bindable quote from an A-rated carrier in a matter of seconds. Also, the technology is device agnostic, so on-the-go borrowers can easily generate and bind their quote from a handheld device.”

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Ellie Mae Launches Updates To Encompass

Ellie Mae has updated its Encompass LOS. Encompass 17.2 enhancements are designed to help lenders of all sizes close more loans, shorten time to close and ensure compliance with regulatory standards. Specifically, the new major release of Encompass includes support for 2018 HMDA collection and reporting changes that expand data capture related to applicants, property and loan features. Additionally, the new major release of Encompass offers secondary marketing enhancements and updates to Encompass Product and Pricing Service.

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“With this major release of Encompass, we’re providing the innovative capabilities that enable our banks, credit unions and mortgage lenders to originate and fund mortgages with complete compliance, loan quality and efficiency,” said Jonathan Corr, president and CEO of Ellie Mae. “While data collection under the new Home Mortgage Disclosure Act (HMDA) begins in January of 2018, this release gives clients support in advance for the new fields to provide greater time to educate, train and prepare.”

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Encompass 17.2 enhancements include:

Support for 2018 HMDA Collection and Reporting Changes

Encompass 17.2 enables collection of the new data set required for loans with a final disposition in 2018 and beyond in a single system of record. A HMDA LAR (Loan Application Register) compliant with the new guidelines published in the CFPB rule is featured in the solution, as well as substantial automation to reduce lender processing time and risk in creating their reports. Also included is the optional expanded Demographic Information Addendum.

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Ellie Mae has a substantial number of tools and resources available to help clients prepare and train internal teams on the new HMDA Reporting Changes.

Secondary Marketing Enhancements

Criteria Based Auto-Lock: Encompass 17.2 includes new functionality to enable more lock desk controls to mitigate risk and reduce exposure. The new criteria based auto-lock allows for control of which lock scenarios should not be allowed to be auto-locked.

Bulk Pricing for Trade Management: To further enhance support for capital markets, Encompass 17.2 includes enhancements for individual loan pricing on bulk trades for correspondent buyers and sellers. It also supports a weighted average bulk price that can be applied to all loans in the bulk.

Encompass Product and Pricing Service Enhancements

Encompass 17.2 introduces support for additional investor pricing, support for Planned Unit Development (PUDs), the ability to identify geography locations using geocoding, and support for VA maximum guarantee to reflect the GSE conforming limits.

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Time To Close Shrinks

In February, time to close all loans for Millennial borrowers decreased to 44 days, the shortest average time to close since March 2016, according to the latest Millennial Tracker released by Ellie Mae. The average time to close a purchase loan for Millennials decreased from 46 days in January to 42 days in February, while time to close a refinance loan also decreased to 52 days in February, down from 58 days the month prior. Similarly, the average time to close FHA loans decreased from 47 days in January to 43 days in February. Average time to close VA loans decreased dramatically from 57 days to 41 days.

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As U.S. housing trends toward a buyer’s market, purchases accounted for 86 percent of all closed loans for the month of February, a slight uptick from 84 percent in January, while refinances fell two percentage points to 14 percent of all loans to Millennial borrowers. Share of conventional loans stayed steady from the month prior, representing 61 percent of loans, while FHA loans increased to 36 percent in February, up from 35 percent the month prior.

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FICO scores across all loan types continued to fall in February to an average of 723, down from 724 in January and their peak of 726 from August through October 2016. For purchases, the average FICO score was 747 for a conventional loan, 690 for an FHA loan and 745 for a VA loan.

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“Purchase loans are increasing, indicating that Millennials are continuing to enter the first-time homebuyer market,” said Joe Tyrrell, executive vice president of corporate strategy for Ellie Mae. “In addition, we saw time to close decrease from 49 days in January to 44 days in February, which indicates that our lenders are seeing more efficiency as they embrace mortgage automation.”

In February, the hottest housing market for Millennials was in the state of Texas. The top markets by percentage of Millennial loans closed in the state included Odessa, Midland and Beaumont-Port Arthur.

About The Author

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

Borrowers Want High Tech And High Touch

Fifty-seven percent of homeowners applied for and completed their latest mortgage completely in person, while more than one-quarter of homeowners (28 percent) applied for their most recent mortgage using a combination of online and in-person interaction, according to the 2017 Borrower Insights Survey of homeowners and renters conducted by mortgage automation provider Ellie Mae. Another 11 percent of homeowners applied for their latest mortgage completely online with no in-person interaction.

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When asked what factor would have improved the mortgage process, approximately 40 percent of homeowners indicated they would have liked a faster process with fewer delays. Twenty percent indicated that a shorter, easier to understand application would be preferable, while 11 percent asked for more communication with their lender throughout the process.

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Millennials were the most likely generation of homebuyers to begin their mortgage application online and finish it with an in-person interaction with their lender (30 percent). Gen X (28 percent) and Baby Boomer (20 percent) borrowers weren’t far behind in using this online and in-person approach.

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“There’s no question that technology is playing a larger role in the home buying experience,” said Joe Tyrrell, executive vice president of corporate strategy at Ellie Mae. “As we expected, many homeowners are seeking a faster and more streamlined experience. And it’s not just a millennial phenomenon; it’s homebuyers of all ages and both genders.”

“But what’s even more telling is that homeowners still want a personal interaction with their lender. They want someone who can answer important questions, and make them feel confident that everything will be handled correctly and on time. While 27 percent of millennials identified the speed of the process as the top area to improve their experience, surprisingly 23 percent cited more face-to-face interaction as the second-greatest opportunity for improvement. By leveraging technology, lenders can provide a more high tech experience to simplify and speed the overall process, while still having the high-touch interactions when and where homebuyers want,” Tyrrell said.

The Ellie Mae survey found that today’s homebuyers most value speed, security and simplicity when applying for a home loan – all of which are enabled by technology. Millennials and women were the most likely to cite security as the most important factor when they applied for a loan. Gen X and Baby Boomer buyers were more likely to value the speed of the process. All three generations equally valued simplicity.

About The Author

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

Integration Enhances Income Calculation And Analysis

Indecomm Global Services, a provider of mortgage technology, training, and outsourcing services, announced that its income calculation and analysis platform, IncomeGenius, is now available through Encompass LOS. The seamless integration allows lenders to perform an income analysis with IncomeGenius directly through Encompass to drive quality and efficiency in the loan origination process.

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IncomeGenius is a web-based SaaS solution that uses Optical Character Recognition (OCR) to automate the income calculation process. The integration of documents and data from Encompass to IncomeGeniusis is an effective way for clients to improve their underwriting process. It simplifies the task of calculating income for borrowers and highlights problem areas requiring the underwriter’s attention. Lenders see a dramatic improvement in efficiency, especially with those that include tax returns. This replaces traditional Excel calculations and macros, resulting in significant timesavings for underwriters, and boosts their throughput with more loans processed in a day.

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“Indecomm Global Services is delighted to partner with Ellie Mae,” said Rajan Nair, CEO, Financial Services, Indecomm Global Services. “Our secure, seamless integration with Encompass enables our clients to simplify the process of ordering an income calculation through IncomeGenius, so they can more efficiently process mortgage loans and grow their business. We look forward to a long and successful relationship with Ellie Mae.”

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Indecomm offers consulting, outsourcing, learning, and technology solutions to its clients in the financial services, hi-tech, life sciences, education, and publishing verticals. Indecomm combines technology platform-driven outsourcing solutions with a flexible delivery model. Indecomm helps its clients improve profitability, gain time-to-market advantage, and achieve immediate return-on-investment. Indecomm was founded in 2003 and has been consistently ranked amongst the Global Top 100 IT and ITeS providers for over a decade. With over 3,500 associates worldwide, Indecomm services its clients from global delivery centers and offices in the United States, Costa Rica, the United Kingdom, India, Malaysia, Singapore, Indonesia, the Philippines, Mauritius, and the Cayman Islands.

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The Place For Thought Leaders And Visionaries

Average FICO Scores Drop In January

As the 30-year note continued to rise in January, average FICO scores on refinances dropped across conventional, FHA and VA loans. While average FICO scores decreased from 726 in December to 722 in January, conventional refinance FICO scores dropped to 732 in January, down from 739 in December and 743 in November. FHA refinance FICO scores dropped to 651 in January, down from 654 in December. VA refinance FICO scores dropped two points to 707 in January.

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Home loans for purchases dipped slightly in January, decreasing to 53 percent from 54 percent the month prior, according to the latest Origination Insight Report released by Ellie Mae. Refinances represented 47 percent of closed loans in the month, up slightly from 46 percent the month prior.

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Closing rates for all loans decreased slightly to 72.2 percent, down from the high of 73.2 percent in December. Refinance closing rates decreased to 67.9 percent, down from 69.6 percent the month prior and purchase closing rates decreased from 77 percent in December to 76.8 percent in January.

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The average time to close all loans increased to 51 days in January up from 50 days the month prior, a likely carry over from holiday seasonality. Similarly, the time to close a refinance increased to 53 days while time to close a purchase held at 48 days.

“Rates continued to increase in January and with that we began to see an uptick in adjustable rate mortgages, a trend that we will watch throughout the year,” said Jonathan Corr, president and CEO of Ellie Mae. “Additionally, FICO scores began to drop slightly across the board while closing rates remained high as homebuyers locked in rates to close their loans.”

The Origination Insight Report mines its application data from a sampling of approximately 75 percent of all mortgage applications that were initiated on the Encompass mortgage management solution. Ellie Mae also distributes data from its monthly Ellie Mae Millennial Tracker, which focuses on mortgage applications submitted by millennials during specific time periods. Ellie Mae defines millennials as applicants born between the years 1980 and 1999. The Millennial Tracker will continue to be released on the first Wednesday of each month.

About The Author

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

Streamlining Prequalifications

Informative Research, a diversified provider of data-driven risk management solutions for lenders and mortgage servicers for over 70 years, has integrated its SoftQual solution with Ellie Mae’s flagship Encompass loan origination software (LOS) platform. Unique to the mortgage industry, SoftQual provides full credit file information at the prequalification stage of the mortgage process, including FICO, without affecting borrowers’ credit scores. Traditional credit report “hard pulls” can be saved for later, once the borrower has moved beyond the prequalification stage.

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Without leaving the LOS system, Encompass users and their prospective borrowers can now benefit from SoftQual’s real time information, whether leveraged online, on the phone, or in person with prospects. “For the first time, lenders can evaluate borrowers with authentic full file information within Encompass, empowering them to create and extend offers to consumers without delay,” said Patrick Kelly, Informative Research’s senior vice president of business development. “This means that prospects are far more likely to become borrowers, lenders can enjoy much higher pull-through rates, and all parties benefit from reduced costs and higher service levels.”

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Before Informative Research redefined the prequalification process with SoftQual, lenders were hard pressed to create firm offers without pulling complete credit reports, something consumers are generally reluctant to approve due to privacy concerns and potentially negative effects on their credit scores. SoftQual eliminates those issues through its instantaneous production of complete credit file information with zero impact on borrowers’ FICO scores.

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“When lenders have the information they need to prequalify prospective borrowers with great accuracy, they can extend firm offers that reflect their most attractive rate and fee scenarios,” Kelly said. “SoftQual gives them everything they need to know about borrowers’ credit profiles in seconds without ever having to leave the Encompass environment, and that provides a stunning competitive advantage for Encompass users.”

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The Place For Thought Leaders And Visionaries

Encompass Updates Speak To Industry Needs

Every LOS has to be responsive to its customers or they’ll lose those customers. The LOS has to sometimes be all things to all people. It’s a tough job. To this end, Ellie Mae has just updated Encompass to include expanded support for Construction loans, more streamlined workflow integrations with the GSEs, Trade Management enhancements and updates to Encompass reports.

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“Our latest version of our Encompass all-in-one mortgage management solution will expand support for Construction loans, offer more powerful trade management enhancements, and Fannie Mae and Freddie Mac workflow enhancements,” said Jonathan Corr, President and CEO of Ellie Mae. “With this new release of Encompass we’re providing innovative capabilities that enable our banks, credit unions and mortgage lenders to originate and fund mortgages with improved compliance, loan quality and efficiency.”

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Expanded Construction Lending Support

Working together with engaged lender clients and investors, Ellie Mae has developed a comprehensive way to process Construction-only and Construction-to-Permanent loans within Encompass. This includes:

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Construction Management Tool: The Construction Management Tool provides a central location within Encompass to originate construction loans and input key construction tracking information, making the construction lending process more efficient and consistent with the standard loan origination process.

Blended and Separate KBYO Disclosures: Ellie Mae supports both methods of generating construction disclosures allowed by KBYO, a single blended disclosure, and two separate disclosures detailing Construction and Permanent loan terms.

Federal and State Compliance Reviews: Encompass Compliance Service, powered by Mavent, performs all the necessary federal, state and local consumer protection compliance reviews for Construction-only and Construction-to-Permanent loans with either separate or blended disclosures.

Closing Documents: Closing documents include all 50-State eligible documents for both Construction-only and Construction-to-Permanent loans.

Fannie Mae Workflow Enhancements

New integration to the Uniform Closing Dataset (UCD) collection system offers flexible options for delivering the UCD file at multiple points in the business process, featuring data quality and eligibility checks. Fannie Mae will also enable non-seller correspondent lenders to access these checks by submitting UCD files directly on behalf of their aggregators. In addition, Encompass will now offer support for Fannie Mae’s HomeReady® offering, designed to meet the diverse needs of today’s buyers with the enhanced affordable lending product.

Freddie Mac Workflow Enhancements

Ellie Mae Encompass 17.1 includes a new integration with Freddie Mac Loan Closing Advisor, Freddie Mac’s solution for the Uniform Closing Disclosure (UCD) delivery mandate. This integration helps lenders validate that their closing data meets the UCD data quality and purchase eligibility checks prior to close and loan delivery, thereby ensuring greater purchase certainty and reduced repurchase risk. This is designed to streamline the closing process within Encompass for loans sold to Freddie Mac.

Trade Management Enhancements

Encompass 17.1 includes several Trade Management updates. First, the Trade Update Queue allows multiple loan trades, mortgage-backed securities (MBS) pools or correspondent trades to be processed in an update queue that runs in the background providing added efficiencies while users continue their day- to-day work. Additionally, the new version of Encompass offers new settings for Loan Data Synchronization options for loan trades and MBS pools allowing users to customize the options for the Loan Data Synchronization process in Trade Management to maximize efficiency.

Expanded Encompass Report

The latest version of Encompass includes an expanded Setting Reports that now also includes User Group settings, in addition to the Organization and the Persona settings currently already available. This enables authorized users to generate and view Excel-based reports on User Group settings, enabling them to respond quickly to any auditor questions regarding user access to Encompass within their organization.

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The Place For Thought Leaders And Visionaries