eNotes as Collateral at FHLBank Chicago
Our FHLBank Chicago members can find everything they need here in order to begin pledging eNotes, find helpful resources, and get answers to frequently asked questions.
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eNote Requirements & Guidelines
As your Illinois and Wisconsin FHLBank, we want to make sure we can provide liquidity and funding to all our members, in all economic environments, when you need it. We also need to navigate our own set of regulations and safeguards to protect the cooperative and the capital you have invested in us. With those considerations in mind, we define acceptance criteria for 1-4 family loans executed with an eNote in Exhibit E of our Collateral Guidelines. Follow the link below to access our eBanking Library and view the Collateral Guidelines.
View the Guidelines in eBankingeNotes Benefits
FHLBank Chicago members can voluntarily leverage an innovative technology to remain competitive, automate origination processes, strengthen compliance and documentation audit trails, and potentially reduce operational costs in the longer-term.
eNotes offer other business, membership, and compliance benefits:
- No physical loan file delivery required to receive collateral value with FHLBank Chicago
- Time efficiencies gained that could lead to reduced origination and servicing costs
- Automated signing process with borrowers not physically present for origination or closing
- Completely digital, virtual, and faster funding experience
eNotes Resources and Materials
Member Collateral Electronic Promissory Notes (eNotes) Acceptance Requirements and Guidelines
FHLBank Chicago Loan Collateral Eligibility eNotes FAQ
FHLBank Chicago eNotes Readiness Checklist
Watch Our Latest eNotes and Collateral Update Webinar
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eNotes Frequently Asked Questions
An electronic copy of a note signed using an electronic signature (eSignature) or device that simply affixes an image of a signature onto a document. An eNote is also not an image or copy of a wet signed document.
A promissory note that is originated, signed and stored electronically according to the standards for a “transferable record” pursuant to the Uniform Electronic Transaction Act (“UETA”) and the Electronic Signatures in Global and National Commerce Act (“ESIGN”). An authoritative electronic copy of the note exists in a file format known as a MISMO SMARTDoc and is registered with an eRegistry and stored in an eVault.
FHLBank Chicago acknowledges that documents executed with a digital signature may be enforceable provided they comply with all applicable laws including ESIGN and UETA. However, pledging these types of loans as collateral to FHLBank Chicago presents several issues:
- If the member is required to deliver loan documents to FHLBank Chicago, FHLBank Chicago would not be able to obtain control over the loan; and
- FHLBank Chicago’s inability to liquidate the loans in the case of a default under the Advances Agreement.
Without the infrastructure, documents, and technology embedding the required protections in the closing process used by members to originate eNotes, FHLBank Chicago have no way of confirming that they are holding the true original note, and additionally that the note has not been altered. FHLBank Chicago would have no control or protection in the process as a secured lender.
The infrastructure and market standards required to support eNotes in other asset classes is not yet established like it is for 1-4 Family Loans. There are many roadblocks to navigate including:
- The MERS eRegistry is an integral part of FHLBank Chicago’s acceptance requirements as it allows FHLBank Chicago to control and perfect our security interest in 1-4 Family Loans. At this point in time the MERS eRegistry does not accept eNotes for other asset classes and there is no other active industry registry that will accept eNotes for non 1-4 Family Loans.
- The lack of defined and standardized documents prevents validation of the electronic record for other asset classes. The lack of standardized documentation creates interoperability issues between any potential Registry and an eVault to validate the eNote record.