The Government National Mortgage Association, more commonly known as GNMA or Ginnie Mae, recently announced the launch of their Digital Collateral Program that will allow Issuers and Custodians of GNMA securities to accept and transfer electronic notes. The announcement comes as the COVID-19 pandemic continues to alter the mortgage lending landscape making electronic transactions more popular.
While government agencies such as FHA and VA have allowed electronic signatures on their loan documents for some time, lenders were largely unable to utilize that allowance for closing with electronic notes due to GNMA rules for these securities. The new Digital Collateral Program outlines the requirements for eIssuers and eCustodians to obtain approval to deal in securities whose underlying transactions are secured by electronically signed promissory notes.
GNMA Digital Collateral Program requirements are similar to those used already for loans transferred to Fannie Mae and Freddie Mac. Lenders must use a Version 1 SMART Doc® that meets the requirements of the insuring/guaranteeing agency and includes modifications necessary for an electronic note, including provisions for identifying the authoritative copy and ensuring the note is a transferable record. Persons using an electronic note as part of the GNMA Digital Collateral Program must also register it with the MERS® eRegistry.
GNMA began accepting applications for eIssuers and eCustodians in the Digital Collateral Program on July 20th. Applicants must proceed through a technical approval process before approval to begin issuing eNotes for GNMA securities. Persons interested in obtaining approval would need to contact GNMA for further information.
At this time, only fixed-rate products will be accepted by GNMA using an eNote. Additionally, special products such as Texas 50(a)(6) and NY CEMA transactions may not currently be secured by an eNote under GNMA rules, as well as those using a POA or made to a trust.
DocMagic is making available an eNote for use with our standard fixed-rate FHA, VA and USDA products. As with our other eNotes, users need only include a request for a SMART Doc eNote when processing a request for a note to have an eNote returned in place of the standard note. Clients wishing to originate an eNote under the GNMA Digital Collateral Program should contact DocMagic’s eClosing Support Team.
