When it comes to mortgages, there's no such thing as a paperless office. A lot of key documents are in hard copy, and Fannie Mae, Freddie Mac and Ginnie Mae -- government-backed corporations that buy up mortgages from banks -- want them safe, secure and readily available. The mortgage or document custodian handles the paperwork.
It's not easy to land a gig as a mortgage custodian. The field is only open to banks, credit unions and other financial institutions governed by federal regulations. The custodian must meet minimum financial requirements and take out insurance against certain perils -- for example, losses from errors and omissions, employee theft, and the physical destruction of the records. The storage facilities for the paperwork have to be secure: Ginnie Mae requires custodians use a vault that will withstand fire for at least 90 minutes.
Part of a custodian's job is certifying that the mortgage notes and other paperwork are the official, original documents. The custodian has to store these documents safely and keep them confidential: Freddie Mac states that nobody but the company's staff or authorized agents such as a loan servicer can see the files. If a homeowner shows up asking for a look at the mortgage note, the custodian should tell him to contact the company servicing the loan.
When a loan servicer needs to see the documents, the custodian has to provide the papers without compromising any confidentiality. A loan servicer who wants to see a Fannie Mae loan, for example, has to register for Web access to the custodian's portal, confirming his identity in the process. Once the servicer registers, he can typically get a mortgage note delivered within less than a day if he requests it before 10 a.m. Document custodians must have insurance coverage that protects the documents when they're in transit.
If a bank qualifies as a document custodian, Freddie, Ginnie and Fannie may audit it to confirm it meets their requirements. The companies can schedule an on-site audit, or spring one as a complete surprise. During a visit, Freddie Mac's auditors review records and documents to see they're in the files, and that the vault facilities are secure. The auditor can also investigate whether the custodian's internal policies and procedures meet federal standards.
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