The issuance of digital collateral by Ginnie Mae has grown rapidly since the government agency accepted its first mortgage guarantee fully secured by loan pools with electronic documents earlier this year.
Issues backed by digital collateral such as electronic promissory notes reached nearly $ 2.1 billion from the end of January, when a initial $ 24 million Rocket Mortgage transaction closed, according to a recent report by Ginnie Mae. This agreement seems to have contributed to a sharp increase in the number of electronic notes. As of Aug. 1, electronic notes totaled nearly 1.28 million, up from 464,691 at the end of last year, according to MERSCorp Holdings, a division of the Intercontinental Exchange.
These figures suggest that Ginnie’s acceptance of digital guarantees, which followed similar initiatives by government-sponsored companies Fannie Mae and Freddie Mac, has increased in line with predictions suggesting that approval of the use of e-tickets by the three secondary market entities could increase the industry’s broader adoption rates. The loans that Ginnie, Fannie, and Freddie facilitate dominate mortgage lending in the United States.
An increase in the share of loans guaranteed by the Department of Veterans Affairs has also prompted Ginnie’s issuers to use technology associated with digital or remote shutdowns. The VA is one of the many government agencies that guarantee or insure Ginnie securitization loans. VA loans represented 44% of collateral in Ginnie securities at the end of 2020 and their share has almost doubled since 2011 when it was 23%.
“Many types of mortgage borrowers may need remote and virtual fencing, but it could be argued that the most acute need is felt by deployed military service members,” said Lynne Chandler, attorney at the Department of the United Nations. 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’s digital collateral approval. One, Atlantic Bay Mortgage Group, has entered into 300 loans under the digital guarantee program since April and many of those loans have gone to veterans, according to the report.
Several stakeholders, such as the document custodians and warehouse lenders who fund the loan pipelines of mortgage companies, have also participated in Ginnie’s digital collateral program and have played a key role in its expansion, notes the report. In general, electronic notes are more efficient for lenders when their use is approved not only by Ginnie, but also by other counterparties.
In addition to facilitating remote fencing and making the mortgage process more efficient, digital guarantees make it easier to keep track of notes. The lost notes were a major concern in the aftermath of the Great Recession, which complicated many seizures at the time.
“It improves the process because there are fewer keys to manage a note,” said Jeff Bode, president and owner of Mid America Mortgage, in an interview earlier this summer about the company’s participation in the eIssuer program. Ginnie. “We should also be able to prevent one of them from going missing. “