What Is a Mortgage Custodian?

A home loan requires quite a bit of paperwork, as you probably know if you’ve ever sat at a closing table. All that paperwork has to be on file somewhere, and when it’s a government-backed loan, there are very specific policies regarding document retention and storage. A mortgage document custodian’s job is to maintain mortgage documents throughout the life of a loan, adhering to all federal regulations.

Generally speaking, the term custodian refers to a financial institution that holds assets for customers. This can also be called a custodian bank. Some of the most well-known financial institutions in the world serve in a custodial capacity, but if they hold records for government-backed loans, they’re required to follow government regulations.

That’s where a document custodian comes in. Fannie Mae, Freddie Mac and Ginnie Mae each require custodian banks to follow specific guidelines. Hiring a team of professionals dedicated to meeting those demands is one of the best ways to accomplish this. But if you’re thinking about becoming a document custodian, it’s important to know what’s involved.

When you look into document custodian meaning, you first need to take a look at the requirements for government-backed loans. Documents must be stored and accessible throughout the life of a loan. That means they can only be discarded once the loan is closed, whether through the home being sold or the homeowner paying it off.

But among the records custodian duties and responsibilities is ensuring the documents remain secure. That means controlling who has access to them and only releasing them to authorized personnel. Document custodians must ensure the facility where documents are stored is not only protected against unauthorized visitors, but also fire, water and other environmental hazards.

Lenders typically use third-party document custodians to manage their paperwork. Third-party custodian meaning a separate service that stores and oversees documents after the loan has completed.

However, in addition to third-party records custodian duties and responsibilities, the custodian must comply with all government regulations, including not being a lender or an affiliate of the lender that issued the loan. It must be a financial institution or affiliate of an institution regulated by the Federal Deposit Insurance Corporation, the Federal Reserve, the National Credit Union Association or the Comptroller of the Currency. It also must have a staff familiar with the government regulations regarding loans and have written procedures in place to ensure regulations are followed.

A document custodian must ensure the facility where documents are stored meets government standards. Many of the regulations relate to access to the building, including what authorized personnel must do to gain access. Fannie Mae requires dual access controls, which means two separate locked barriers or one locked barrier combined with a monitoring device.

In addition to security, it's also a requirement for documents to be protected against dangers like fire and flooding. This means a fire-resistant storage area that offers at least two hours of protection against a fire, as well as a written plan for recovering any remaining documents in the facility in the event of fire, water or other damage.

When you’re looking into the document custodian meaning, you may be interested in becoming an employee of a facility that stores mortgage documents. Custodians must ensure that every employee hired follows the laws outlined by the governing authorities. This includes being able to prove that they have procedures and that they ensure each employee follows them.

Employees will also adhere to strict security measures, which likely means using an access card or biometrics to get into secure areas of the facility. Custodians must maintain a visitor log and require every nonemployee to sign that log each time they enter. When a visitor is in the building, an employee must act as an escort, staying with the person at all times. This includes vendors.