Federal Home Loan Banks Pursuing E-Note Abilities with MERS

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MERS – a part of ICE Mortgage Services – has partnered with the Federal Home Loan Bank system to facilitate use of the MERS registry by bank member financial institutions that want to pledge e-notes as collateral.

“The Federal Home Loan Bank system is a critical source of housing finance and community investment liquidity for its member institutions, so its acceptance of e-notes as eligible, pledged collateral for its lenders signifies a meaningful shift in investor confidence around digitally executed mortgages,” says Christopher McEntee, president of ICE Mortgage Services.

“MERS has long advocated for e-mortgage adoption, and we welcome the opportunity to support the Federal Home Loan Banks’ commitment to their member institutions’ digital mortgage efforts,” he adds.

The 11 Federal Home Loan Banks announced in February they are developing a solution that will pave the way for their members to pledge e-notes as eligible collateral. Each FHLBank has its own systems, processes and policies regarding collateral, and implementation timelines for each FHLBank to begin accepting e-notes vary.

To become eligible to submit e-notes, FHLBank member financial institutions will need to work simultaneously with their respective FHLBank and MERS to execute the necessary legal and operational requirements, implement a compliant e-vault, and integrate with the MERS registry to establish their respective FHLBank as the eligible secured party of e-notes pledged as collateral.

The FHLBanks have been working with MERS to develop a process for their members to register e-notes in the MERS registry. Several FHLBanks expect integration to be complete in Q3 2020, while the remaining FHLBanks are establishing the necessary infrastructure and expect to be fully integrated in Q4 2020 and continuing into 2021.

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