Blockchain Technology — Revolutionizing the Mortgage Market
by Aeries Blockchain Corporation Blockchain Development, ICO DevelopMortgage 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
workflows
Blockchain 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. Visit: https://aeries.io/services/blockchain
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Created on Nov 15th 2018 02:25. Viewed 645 times.