Ginnie Mae may allow commingling of electronic and paper notes

Ginnie Mae is exploring the possibility of commingling paper and electronic promissory notes in securitized mortgage pools it insures, something issuers have been eager to see since the government agency first announced it would be piloting digital capabilities.

“I think we’re going to see that first leg of being able to offer commingling come into place,” said Lynne Chandler, director of digital collateral at Ginnie Mae, in a webinar on government agency’s e-note initiative hosted by Falcon Advisors late last week. The webinar’s organizer, which is headed up by former government-sponsored enterprise regulator Armando Falcon, has been consulting with Ginnie on digital initiatives. Ginnie is an arm of the Department of Housing and Urban Development.

Chandler stopped short of promising the flexibility related to commingling e-notes, characterizing it as a “future policy choice that Ginnie may decide upon.”

Ginnie Mae’s original decision to disallow commingling stemmed in part from concern that it could affect the marketability of the rights to mortgage servicing cash-flows from borrower payments, but it has said all along that it would consider additional flexibilities as the digital initiative evolved.

Chandler’s comments follow on the heels of Ginnie’s release of new guidance that will make e-notes easier to use in some other circumstances, and just ahead of the reopening of its digital collateral program to a new round of participants starting on June 20.

Since Ginnie opened its digital collateral program to applicants in July 2020, 28 have sought electric issuer status. Six document custodians also have applied for approval to use e-notes. A dozen issuers, three custodians and one subservicer have received approvals and the amount of digital collateral issuers have securitized to date tops $8 billion.