The Repairer’s Guide to Mortgage Blockchain Disruption
I understand most repairers see the title of this story and think: is blockchain even a mortgage thing? Short answer: not yet, but it will be. It is not enough to modernize the service of SaaS technology, we also need to put in place new infrastructure to stay ahead of the consumer credit and capital markets. With that, here’s what services need to know about the mortgage blockchain disruption right now.
When will mortgage blockchain go mainstream?
Sagent recently joined forces with digital payments / loan disruptor Figure in a deal that adds Figure as a client of Sagent and allows us to bring large-scale mortgage assets to Provenance’s public blockchain ( developed by the Figure team) to reduce mortgage costs by up to 100bp from origination through securitization.
Blockchain for mortgages is not yet mainstream, but it will be soon. Instead of constant QA / CQ and loan re-underwriting / revalidation throughout the loan lifecycle, blockchain can streamline the process, bringing transparency, speed, cost reduction and increased portability of MSRs. .
How the mortgage blockchain works
Simply put, the blockchain is a secure, decentralized database whose history can never be changed. Crypto pros call this never-changing feature “immutability,” which makes a mortgage blockchain like Provenance the ultimate source of truth for all parties throughout the origination-service-securitization lifecycle.
This is how it works
For borrowers, the loan application experience resembles the telephone process they are used to. However, since the loan comes from the blockchain (via an infrastructure invisible to the borrower), the originator does not need to verify / recheck the borrower’s data / documentation with their lenders and investors. warehouse. This results in massive reductions in origination costs.
Fast forward a few years, and a mature mortgage blockchain will replace our industry’s ‘trust, but verify’ approach to mortgages with the truth: Immutable blockchain becomes the single source of true source data on borrowers, loans. and loan pools.
In terms of service, the blockchain will eventually fuel real-time data sharing between services, investors / GSEs, regulators and borrowers. Mortgage agents can track borrower payments, complete required monthly reports to GSEs and other stakeholders, manage non-performing loans through loan mods, and manage potential foreclosure, REO and preservation efforts. property on the chain with immutable record keeping to reduce risk and costs throughout the process.
On the securitization side, a smart contract can be created for each transaction and hosted on the chain to test loans against preferred underwriting standards and flag any loans in a pool that do not meet the criteria.
As Figure founder Mike Cagney explained, “Blockchain can reduce audit quality control expenses. [and provide] a means of certainty. In the over-the-counter market, it can take 100 days for a pool of loans to settle. [On blockchain], you can do it in real time.
Blockchain disruption for skeptics
To skeptics, I urge you to carefully consider the benefits before removing mortgage blockchain.
Figure has already proven the cost reduction potential, demonstrating 117 basis points of savings for HELOCs from inception to transaction execution. With their acquisition of Homebridge, they will continue with proof cases of blockchain using billions of senior mortgages in 2022. If the end result looks like Figure’s HELOC cases, we might see real momentum for the mortgage blockchain.
It should also be noted that a large portion of the cost reductions would come from securities transactions, through reductions in personnel costs and commission expenses. A Moody’s report estimates that blockchain securities transactions could reduce these expenses by 10-20%, with annual savings of between $ 840 million and $ 1.7 billion.
Deliver today while building for tomorrow
The pandemic has forced a rapid digital transition from which we cannot – and must not – turn back. As more banks / lenders embrace the technology to prioritize the consumer experience, the next logical step is to streamline the process itself, and mortgage blockchain is the most efficient way to do this. .
Structural disruption is like the proverbial frog in boiling water – it happens slowly, then suddenly. In other words, only the unprepared are disturbed. At Sagent, we’re laser-focused on our vision of modernizing customer service first from a SaaS software perspective, but we’re also building new blockchain plumbing to prepare for the next two decades.
We deliver today to our repairers while building for tomorrow, and that’s what repairers should expect from all their partners.