Digital collateral issuance by Ginnie Mae has grown rapidly since the government agency accepted its first mortgage collateral earlier this year that was fully backed by pools of electronic documents.
According to a recently released Ginnie Mae report, the issue, backed by digital collateral like electronic promissory notes, has risen to nearly $ 2.1 billion since late January when an initial $ 24 million transaction was closed with Rocket Mortgage. Dollar increased. This deal appears to have contributed to a large increase in the number of eNotes. According to MERCorp Holdings, a division of Intercontinental Exchange, eNotes were nearly 1.28 million as of August 1, up from 464,691 at the end of last year.
These numbers suggest that Ginnie's adoption of digital collateral, following similar steps by state-sponsored companies Fannie Mae and Freddie Mac, has increased in line with predictions suggesting that the three aftermarket firms' consent to use eNotes has increased the adoption rate of the Industry could increase. Loans enabling Ginnie, Fannie, and Freddie dominate U.S. home lending.
An increase in the proportion of loan guaranteed by the Department of Veterans Affairs has also led Ginnie's issuers to use technology related to digital or distance deals. The VA is one of several government agencies that guarantee or insure the loans in Ginnie securitisations. VA loans made up 44% of collateral in Ginnie securities at year-end 2020, and their proportion has nearly doubled since 2011 when it was 23%.
"Many types of mortgage borrowers may need virtual and remote closure, but it could be argued that the deployed military personnel are most urgently needed," said Lynne Chandler, attorney with the Department of Housing and Urban Development, in the report she wrote for Ginnie. Ginnie is an arm of the HUD.
In total, a dozen issuers have Ginnie Mae digital collateral approvals. One of them, Atlantic Bay Mortgage Group, has taken out 300 digital collateral program loans since April, and many of those loans have been made to veterans, according to the report.
Several stakeholders such as document custodians and warehouse lenders who fund mortgage lenders' credit pipelines have also participated in Ginnie's digital collateral program and have played a key role in its expansion, the report said. In general, eNotes are more efficient for lenders when their use is approved by not only Ginnie but other counterparties as well
Digital collateral not only makes distance deals easier and makes the mortgage process more efficient, it also makes it easier to track borrower's notes. Lost notes were a major concern in the wake of the Great Recession, which made many foreclosures difficult at the time.
"It improves the process because there is less touch to handle a note," said Jeff Bode, president and owner of Mid America Mortgage, in an interview earlier this summer about the company's participation in Ginnie's eIssuer program. "We should also be able to avoid losing one."