Ginnie Mae to allow pooled eNote, paper securitizations

 The U.S Department of Housing and Urban Development will begin allowing eNotes and traditional paper notes to be securitized in the same Ginnie Mae pools beginning in June.  

HUD Acting Secretary Adrianne Todman delivered the news at the Mortgage Bankers Association's Secondary and Capital Markets Conference in New York on Monday. The decision was the result of stakeholder feedback as well as Ginnie Mae's proven success with past efforts with eNotes, she said.   

Noting the "phenomenal wave of growth," Todman said Ginnie Mae has issued over $38 billion in eNotes since 2021 through its digital collateral program.

"Issuers and key participants in the industry have urged the commingling of eNotes with paper notes to encourage further adoption, improve efficiency and allow borrowers to see added benefits may come in both access and costs," Todman said.

The announcement comes as lenders continue actively pursuing strategies to cut costs following the business slowdown of the past two years. According to the MBA, mortgage businesses saw the highest loss per loan originated in recorded history during the fourth quarter.

"[eNotes] cost less to originate than paper notes in this time of lower mortgage activity," Todman said.

Momentum was increasing toward commingling of the notes, which had been under consideration for two years. Todman also noted the efforts of Department of Veterans Affairs lenders in the push for eNotes.

"Veterans and service members have used eNotes to pursue loan modifications and take other mortgage actions while they've been stationed abroad. We are proud of the unique benefits this tool has provided those who serve our country, and we want more Americans and more lenders to benefit."

Also during her session, Todman said she hoped to increase utilization of the Federal Housing Administration's 203K program for home rehabilitations. Late last year, the FHA updated policies governing 203K originations, which raised financing limits and might also encourage development of accessory-dwelling units to increase affordable housing supply.  

While frequently seen as an opportunity to encourage redevelopment in cities, Todman also pointed out potential for the program in rural communities. 

"Where we've also found it to be of use is in rural areas, where there may be inventory, but homes have been sitting there vacant because of disinvestment that's happened there. So we're really excited to be able to expand access," she said.