Ginnie Mae recently announced that it will permit the issuance of mortgage-backed securities (MBS) backed by mortgage loans documented using electronic promissory notes (eNotes) under its Pools Issued for Immediate Transfer (PIIT) program beginning February 1, 2026.  The PIIT program is a “co-issue” program that allows loan originators to pool loans with Ginnie Mae, and simultaneously transfer the issuer and servicing responsibility to a purchaser of the related servicing rights.  Loans backed by eNotes are a quickly growing part of the residential lending market – in its announcement Ginnie Mae states that since it began accepting digitally backed loans (the pilot program launched in 2020) at least $92 billion dollars in eNote backed assets have been included in Ginnie Mae MBS, with over 50 issuers participating in the program.  Until now, however, Ginnie Mae was unable to accommodate eNotes in the PIIT program.  Fannie Mae and Freddie Mac already have co-issue programs for the purchase and pooling of loans backed by eNotes.

Expanding the PIIT program to permit inclusion of eNotes is the next logical step, and will likely have a significant effect on the market for Ginnie Mae servicing rights and expand the use of eNotes for government-insured loans that comprise Ginnie Mae MBS pools.  Because the PIIT program permits originators to sell the servicing rights simultaneously with the issuance, it allows those originators to secure immediate liquidity for future originations and transfer the obligations to service the loan to suitable servicers quickly following origination.  As more borrowers and originators turn to eNote origination for the convenience it affords, the inability to include eNote loans in PIIT transfers may have acted as a drag on the potential growth of eNote originations of government-insured loans slated for pooling with Ginnie Mae.

Now that Ginnie Mae will allow eNotes in PIIT MBS issuance, we expect both originators and purchasers of Ginnie Mae servicing to expand eNote originations and servicing rights purchases and sales. Note, however, that the parties may need new purchase and sale agreements, or need to amend their existing agreements to include specific provisions related to the delivery of eNotes.  The parties’ approach to eNotes is a new addition to the list of issues to consider in connection with servicing rights purchase and sales.