As eNote Use Increases, FHLBs Take Step Toward Acceptance
The Federal Home Loan Banks this week took a big step toward acceptance of eNotes as collateral, with a commitment to develop eNote requirements by the end of this year.
The 11 FHLBanks this week issued the following unified statement regarding acceptance of eNotes (the functional equivalent of a paper promissory note when created in conformity with eCommerce law requirements) as collateral:
“The 11 Federal Home Loan Banks (FHLBanks) are currently working together to develop a future solution for providing collateral value for eNotes. As member-owned cooperatives, we understand eNotes provide many benefits to both our nearly 6,900 member institutions and their borrowers. While significant progress has been made around this effort, implementation timing is dependent on, among other things, system and process changes for each independent FHLBank. The goal is to have requirements established for the acceptance of eNotes as eligible collateral agreed on by all FHLBanks before the end of 2019. Once the requirements are in place, each individual FHLBank will set a timetable to provide collateral value for loans with eNotes.”
Rick Hill, Vice President of Industry Technology with the Mortgage Bankers Association and Executive Vice President of MISMO, which oversees standards for the mortgage industry, said MBA has been working with the FHLBs for some time to move in this direction.
“It’s one more step that will help those who want to use eNotes and one more improvement to the process,” Hill said.
eNotes have increasingly seen more widespread industry acceptance. Intercontinental Exchange, Atlanta, an operator of global exchanges and clearing houses and provider of data and listings services, and its subsidiary MERSCORP Holdings Inc., yesterday announced the number of eNotes added to the MERS eRegistry during the first quarter exceeded the total number of eNotes registered for all of 2018.
MERS reported its member institutions registered nearly 19,000 eNotes in the first quarter, compared to 17,000 eNotes registered in all of 2018. A year ago, MERS reported just 375 eNotes. MERS said outstanding active eNotes increased to 109,000, representing $28 billion in residential mortgages.
“As the industry continues to migrate toward a fully-digital process, the early movers gain efficiencies and can remain most competitive in the market,” said Christopher McEntee, President of ICE Mortgage Services. “We’re excited about the rapid adoption of eNotes, and we expect to see a continual rise as more participants invest in next generation infrastructure.”
