Blockchain Technology?—?Revolutionizing the Mortgage Market

Mortgage industry has been around for quite a while, however, has not enhanced its end to end mortgage application processing times. This is because of the archaic innovation and processes still pursued by the parties associated with the mortgage food-chain.Currently, it takes an average of 40+ days from submitting a home loan application to shutting the loan and settlement of funds.

Blockchain mortgages have the potential to revolutionize the mortgage industry by eliminating costs and inefficiencies in this manner improving funding time and saving a considerable amount of money that is currently charged in each step of application processing.

The typical mortgage application process

The current mortgage application process is extensively paper-based, labor-intensive, tedious, and costly. This is in most part because of a long queue of 3rd party service providers that all have an input to the process, for example, surveyors, solicitors, credit agencies, and title deed offices.

Generally, there are seven actors/parties associated with the processing of loan application that buyers need to manage; they are depicted in the figure below. The journey of a mortgage application perseveres amid different stages adds to delays culminating in the final ownership by a consumer after 40 days.

Blockchain mortgages to the rescue:

Blockchain is a distributed ledger that is encrypted/secured so it is just available to individuals from the parties that are authorized to access it. As of now, different parties listed in the figure maintain their own records which are either private or public. Lenders, insurers, credit bureaus need to access/provide the vital info expected to decide creditworthiness of borrower or possibility of the loan sum dependent on the valuation of the property. In the meantime, separate records should be updated when the data is exchanged or a transaction is done by each party. All these tasks are as of now dealt manually.

With blockchain mortgages, the data or information required to evaluate and approve a loan application would be securely stored on a network where these ledgers would be updated automatically and in real-time. The utilization of this distributed ledger technology (DLT) technology would permit a loan contract to be generated automatically, set up home loan account, transfer and register ownership for the property.

How Blockchain will Improve the Entire Mortgage Value Chain

Firms who can grasp the new technology gain access to more productive distribution and execution networks for their financial transactions and shared eco-systems to their customers, partners, suppliers, and regulators.

The blockchain based solution for Mortgage Lending financial institutions will diminish processing times and reduce errors, resulting in:

Reduced costs

By automating and securing the mortgage lending processes, a blockchain-based system co-ordinates and distinguishes the agents and intermediaries and could lessen operational costs, expenses, and fraud for financial institutions. We gauge investment funds of $177 million on a loan book of $97.7 billion for a typical mortgage lender.

Improved workflowsBlockchain technology is assumed to reduce total transaction time all through the mortgage value chain by 25%, to 30 days from 40. In the event that national governments build up a blockchain-based title registry, this is expected to fall a further 25%, to 20 days.

Enhanced customer experience

Customers want to be served efficiently, securely and transparently what, for some, is the largest transaction of their lives.

The intrinsic identity, security and audit trail characteristics of blockchain gives more control to buyers and borrowers, giving full visibility of progress and intermediary activities.

The customer experience can be enhanced through,

• Enhanced loan search and credit qualification checks and approvals
• Reduced fees along the mortgage value chain
• Easier document exchange, disclosure, and due diligence
• Faster asset appraisal, insurance, and loan security
• Accelerated certainty and decreased fraud during loan funding approval; cash transactions with sellers and intermediaries; and completion of asset and title exchange

The Way Ahead:

The stakes of blockchain are undeniably excessively huge for financial services firms, making it impossible to look for a wait-and-see approach. The blockchain technlogy definitely streamline tasks and cut down expenses while opening new revenue opportunities.

Without a doubt, the legal and regulatory challenges to blockchain adoption in the mortgage industry are extensive however not unfavorable. Governments and trade bodies could cooperate to help give a framework for more productive business practices although bureaucracy, vested interests and inertia can combine to hold back progress.

In any case, those that stand still risk left behind. That, in addition to the expectation of lessening costs and speeding up transactions in a more timely and efficient way, is probably going to empower innovation; truth be told, there are already competitors that are as of now demonstrating their enthusiasm for moving into space.

Aeries Blockchain Corporation is a US based Blockchain and AI development firm with distributed team across Europe and Asia, that focuses on building enterprise grade blockchain applications. Visit: https://aeries.io