MBA Offers Recommendations to Ginnie Mae Digital Collateral Guide

The Mortgage Bankers Association, in a Dec. 23 letter to Ginnie Mae, offered a series of recommendations as the agency develops its upcoming Digital Collateral Guide.

The Guide, part of agency’s Ginnie Mae 2020 roadmap for sustaining low-cost homeownership (https://www.ginniemae.gov/newsroom/publications/Documents/ginniemae_2020.pdf), is intended to provide requirements that would apply to securitization of pools and loan packages containing digital mortgages. Ginnie Mae, which asked for industry comments in a Request for Information, said the Guide is a “vital first step to fully incorporating digital mortgages into the Ginnie Mae business model.”

In the letter, MBA Senior Vice President of Residential Policy and Member Engagement Pete Mills commended Ginnie Mae for its commitment to adapt to the new digital mortgage landscape. “A future state in which Ginnie Mae accepts digital collateral not only potentially lowers risk by improving data integrity and reducing loan defects, but could provide the added benefit of increasing access to credit for Americans across the country,” he said.

MBA offered the following recommendations: 

eNote Origination

MBA noted the eGuide states that an eIssuer applicant must have the ability to originate and secure eligible eNotes and said further clarification is needed regarding eligibility of eIssuers that only purchase eNotes from other lenders and do not originate such eNotes directly. “Ginnie Mae should clarify whether an issuer is required to operate an eClosing system if it is not originating eNotes directly,” MBA said.

eCustodian

MBA said Ginnie Mae should explictly state whether any documentation aside from the Master Custodial Agreement (Form HUD-11715) is required of issuers and custodians once both are approved (as eIssuers and eCustodians) by Ginnie Mae.

eVault

MBA noted the eGuide states that all contracts between an eIssuer or eCustodian and any third-party eVault provider must specify that the eNotes being held in the eVault are the property of Ginnie Mae. “Additional details are needed regarding the entities that are permitted to perform the annual audits of eVaults,” MBA said. “It is unclear if the legal certification and technology certification referenced in the eGuide are required if an eVault provider is on the eMortgage Technology Provider Lists maintained by Fannie Mae and Freddie Mac.” Additionally, MBA said Ginnie Mae should specify whether it will add the Technology System Providers integrated with MERS eRegistry.

Third-Party Certifications

MBA said the process of identifying third parties that meet these standards may be “difficult and possibly very costly.” MBA said a preapproved list of entities provided by Ginnie Mae could eliminate such issues and ensure that all institutions using these services are in compliance with the eGuide. 

Electronic Images

MBA noted confusion regarding storage of electronic images or copies of documents required for the initial certification, final certification, or recertification of a digital pool or loan package. “Ginnie Mae should clarify whether eCustodians are expected to operate their own image repositories or whether access to a servicer’s image repository containing the documents would suffice,” MBA said.

The letter also said additional guidance is required to determine whether electronic images of documents are acceptable only for digital pools or if custodians can begin to store electronic images for all pools. “The naming convention Ginnie Mae has outlined for eDocs may be too long to be supported by certain storage applications. The use of an abbreviated version may address this problem,” MBA said.

eRecording

MBA noted the eGuide seems to imply that eNotes are a requirement for eRecording of security instruments, an interpretation thatdiffers from Fannie Mae and Freddie Mac policies and may limit the potential benefits of eRecording. “Ginnie Mae should reconsider this policy so as to allow the use of eRecording for all loans, regardless of whether the note is paper or digital,” MBA said. 

MERS

MBA noted the eGuide states that eligible collateral for a digital pool or loan package must be originated with MERS as the Original Mortgagee. MBA pointed out this feature is only a recommendation for Fannie Mae and Freddie Mac–not a requirement. “Further clarification is needed regarding any flexibility on this requirement and the eligibility of loans that are not originated in MERS but are later assigned to MERS,” MBA said.

Loan Modifications

With respect to both certification and securitization of modified eMortgages, MBA said further clarification is needed regarding which pools and loan packages (paper or digital) can contain paper-based loan modifications. 

Intervening Assignments

MBA said the eGuide states that intervening assignments are not required, and it is unclear if the reason for this feature is that Ginnie Mae expects these assignments to be transfers within MERS. It is also unclear if there are any situations in which assignments would be required.

Buyout Requirements

The eGuide lists stipulations governing the buyout of defective loans, one of which is that a pooled loan associated with a digital pool or loan package must be bought out prior to the initiation of foreclosure proceedings. MBA said this requirement seems to differ from guidance associated with non-eMortgages, and “has the potential to create unnecessary strains on issuers given the larger gap in time between the buyout and the recovery of claim proceeds.” MBA said additional details regarding the reasoning for this requirement would allow analysis of the potential benefits relative to the potential problems that could arise for issuers.

Additionally, MBA noted multiple locations in the eGuide reference the pilot program and at times it is unclear which portions of the eGuide apply only to the pilot program and which are intended to be fully implemented on a permanent basis. “A list identifying items that only apply to the pilot program could eliminate any misinterpretation or confusion in this area,” MBA said. It also noted the eGuide references “demonstrated experience,” “sufficient expertise,” and “sufficient training” in several sections. “Additional detail and clarification is needed regarding what constitutes these measures to ensure applicants understand any and all components of these requirements,” MBA said.