To understand what Blockchain technology can do for mortgage lending, you first must understand how it works. Blockchain is a type of next-generation digital business process improvement software.
A blockchain is a combination of a few technologies: private key cryptography, an online network, and an incentive to service the network’s transactions, record-keeping and security. This technology has many benefits for lending companies, brokers, real estate agents, and every other aspect in the mortgage industry.
Companies using this technology could benefit from enhanced record keeping, time-stamped disclosures, “smart contracts”, payments, agreements, and contract tracking. It could also help validate the mortgage industry’s loan data and documents, making it easier to originate loans.
Better record keeping could also address fraud. By making it harder to tamper with ownership records, blockchain could reduce the odds of mortgage fraud. The mortgage industry can help facilitate the use of digital signatures by making blockchain the dedicated technology. By offering the mortgage team and customer the same benefits whether signing digitally or on paper, it definitely brings something new to the table.
The enhanced security of blockchain is an attractive quality. There are specific rules for transactions and only some can access certain files. It monitors transactions, digital assets, and counterparties very closely, making blockchain very trustworthy. The technology maintains its own history and full audit trail since inception. In a private blockchain, participants need to be given permission to read and write records.
There are still plenty of questions people have before this technology can be implemented. Since re-engineering entire systems will be costly, the benefits must be more appealing than just enhancing the already existing systems. It also needs to be regulated globally with already agreed upon standards. The regulatory sandbox could be a catalyst for this. Some questions that are being asked are: Who validates transactions, screens participants, maintains the blockchain, and arbitrates security and rule changes? There also has to be some sort of key recovery feature, in case anyone loses their key, so they won’t lost their identity and assets.
While it is still unknown when this technology will be implemented throughout the mortgage industry, making the mortgage process easier for borrowers and lenders is still an exciting possibility!
