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ComplianceJune 29, 2022

Ginnie Mae reopens its Digital Collateral Program: Why is it an important digital milestone?

Ginnie Mae has announced that it is enhancing its Digital Collateral Program—read eNote program—and is moving from a pilot program with just a few issuers into full production. During the pilot program, Ginnie Mae guaranteed about $8 billion in mortgage-backed securities (MBS).

On June 20, Ginnie Mae began accepting new applicants for the program, including issuers, custodians and subservicers. Issuers that meet Ginnie Mae’s requirements will be able to originate eNotes and use them to create Ginnie Mae securities. This is a major step forward for eMortgage securitization as Ginnie Mae backs more than one-third of the mortgage market (FHA, VA and USDA loans.)

In 2021, for example, Ginnie Mae guaranteed more than $934 billion in MBS, representing nearly 3.2 million loans, according to their annual report.

What is in the new eGuide?

As part of the reopening, Ginnie Mae has produced a new eGuide to help participants understand the program’s requirements and provide updated guidance on eNote securitization.

Some of the major changes in the eGuide include:

  • Revised requirements for remote online notarization (RON) video storage
  • A revised policy for the use of power of attorney
  • Streamlined procedures for the release of secured party requests
  • Ability to perform eMortgage modifications

The eGuide can be found here.

How will the Digital Collateral Program work?

Eligible lenders can originate FHA, VA and USDA loans as eNotes and then pool the eNotes into securities that Ginnie Mae will guarantee.

Unlike Fannie Mae and Freddie Mac, Ginnie Mae doesn’t buy loans outright. Instead, it guarantees their repayment so they can be issued as Ginnie Mae securities. Logistically, eNotes will be registered on the MERS eRegistry and then held by the issuer or custodian. Copies of the eNotes will also be placed in Ginnie Mae’s eVault.

What is Wolters Kluwer eOriginal’s role?

We are the exclusive eVault provider to Ginnie Mae, which is central to the agency’s ability to accept eNotes. Our purpose-built solution can accept eNotes produced using our technology and that of other major document and eVault providers.

The Wolters Kluwer eOriginal team also worked closely with Ginnie Mae to develop common eNote standards for FHA, VA and USDA loans.

Why was Wolters Kluwer eOriginal selected?

Wolters Kluwer eOriginal is at the forefront of innovation for the industry, and we share a common goal with Ginnie Mae of modernizing the industry. It is why our eVault was selected when Ginnie Mae first launched the program in 2019 as part of its modernization initiatives.

Last year, our technology created and registered more than 530,000 eNotes, accounting for approximately 90% of all eNotes registered on the MERS eRegistry. In addition to Ginnie Mae, Fannie Mae and leading lenders, such as Rocket Mortgage, Fairway Independent Mortgage and Wells Fargo, use our eVault technology.

What is the program’s potential?

Ginnie Mae’s first eNote securitization was completed in January 2021, and in the past year, approximately $8 billion in MBS backed by eNotes have been issued. A rough back-of-the-envelope calculation ($8 billion/$250,000 per loan) suggests that over 32,000 loans, or about 1% of Ginnie Mae’s total 2021 production, were eNotes.

In contrast, eNotes consist of nearly 5% of all Fannie Mae and Freddie Mac volumes. If the Ginnie Mae program reaches this level, and most observers expect it will, that would quadruple Ginnie Mae’s annual eNotes production.

Another positive factor is who the largest lenders in the government loan category are. FHA loans make up the lion’s share of Ginnie Mae’s volume, and the top 10 FHA lenders account for nearly one-third of FHA originations. Many large FHA lenders, like Rocket Mortgage and Freedom, the number one and two FHA originators, already have eVaults and a track record of selling eNotes to the GSEs.

As the market moves more aggressively to adopt digital securitization, Wolters Kluwer is helping lead the way with its advanced technology and strategic guidance to Ginnie Mae.

Simon Moir
Vice President, Banking Compliance Solutions, Wolters Kluwer Compliance Solutions
Simon Moir is Vice President, Banking Compliance Solutions, Wolter Kluwer Compliance Solutions. 
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