Momentum Builds as 2nd FHLB Accepts eNotes

Earlier this month, the Federal Home Loan Bank of Des Moines became the first of the 11-member FHLB system to announce it would accept residential mortgage electronic promissory notes—eNotes—as collateral. Now, a second FHLB has jumped on the eNotes bandwagon.

The Federal Home Loan Bank of Dallas announced it would begin accepting eNotes as collateral for one- to four-family residential loans and closed-end, second-lien mortgage loans, effective July 21. Additional loan types for which eNotes will be accepted will be announced in the future.

Ginnie Mae also announced this month (APM 20-10) that it began to implement the policy, technology and operational capabilities necessary to accept electronic promissory notes and other digitized loan files as collateral for Ginnie Mae securities (Digital Collateral). As part of this initial phase, Ginnie Mae said its issuers can now apply to participate as eIssuers and begin securitizing government-backed mortgages comprised of Digital Collateral with Ginnie Mae approval.

The Mortgage Bankers Association has been advocating with all 11 FHLBanks for a number of years to get them to permit eNotes. Mike Fratantoni, President of MISMO and Chief Economist and Senior Vice President of Research and Industry Technology with MBA, commended the FHLBs and Ginnie Mae for their implementation of Digital Loan Files and eNotes

“MISMO commends and supports recent moves by Ginnie Mae and the Federal Home Loan Banks of Dallas and Des Moines to begin accepting residential mortgage electronic promissory notes – eNotes – as collateral,” Fratantoni said. “These eNote implementations are based on the MISMO SMART Doc® specification that is deployed across the mortgage industry. These developments help advance digital mortgage adoption as most lenders will be able to use eNotes and access additional sources of liquidity for the majority of their loans.”

“We are seeing increased momentum for digital mortgages due to tech advances and in-person restrictions,” said Christopher McEntee, President of ICE Mortgage Services and a MISMO board member. “Developments like these from Ginnie Mae and Federal Home Loan Banks of Dallas and Des Moines highlight the important industry collaboration on MISMO standards that are guiding innovation and moving the mortgage industry forward.”