VP of Marketing @ LSG/aXpire Group
When it was first developed by the military, the internet didn’t seem like it was going to become a staple of human existence in the way that it has. Not only has the internet come to stay, but as a hub for diverse activities and an environment to share and distribute information: it has paved the way for the creation of several additional innovations, one of which is blockchain technology. Like the internet when it was created, blockchain also has had its fair share of skepticism. However, the technology has proven to be more than just an underlying technology for digital currencies, it can be effectively adapted for different uses in various industries and sectors.
Any industry that is currently centralized (controlled by a group of stakeholders) and riddled with middle-men who take a cut — can be improved.
Blockchain technology has already begun to cause disruptions in the financial industry. While adoption is slow, people are beginning to realize that it is easier for the both the banked and the unbanked. The benefits are abundant: why wouldn’t people want to enjoy efficient, faster, secure, and decentralized services — that the traditional banking system would normally not give its consumers.
The mortgage loan industry is beginning to catch the blockchain bug, as new decentralized platforms have been created to make it easier for people to easily access real estate loans. Ordinarily, with the traditional mortgaging system, it is usually a herculean task trying to get mortgage loans for properties, and this has caused some form of friction between the institutions that control the mortgage industry and consumers. Furthermore, it seems like mortgages/loans were made for only the rich, as it always seems like they always have easy access to loans. People who really need loans typically don’t get the terms they want or need, and people who would get those terms, don’t need a loan.
Blockchain technology may not have all the solutions to the various problems plaguing the mortgage industry, but it can at the very least begin addressing these problems one by one.
One of the major challenges plaguing the industry is a lack of transparency, and blockchain (also known as distributed-ledger technology or DLT) decentralizes the current mortgage model, and hence, decentralizes how transaction information/records are stored. With a decentralized system, lenders and companies are stripped of the power to manipulate data/information, or get involved in fraudulent activities with data. The information is shared across the entire blockchain network pseudo-anonymously, without a central figure interfering or supervising the processes. Every transaction that takes place on the blockchain network, becomes a public record, stored in a public ledger — and cannot be altered or tampered with.
Disintegration of the lending process is another area that blockchain technology can deal with. At the moment, the processes for mortgage approval usually costs a lot of money, as there are underwriting fees, legal fees, levies, and more expenses to be paid as part of the mortgage processing. With the aid of blockchain’s distributed-ledgers and smart contracts, such intermediaries and 3rd parties are unnecessary, thereby reducing costs and time taken. The process of underwriting a loan can take anywhere from 24–48 days, and cost both the person applying for the loan and the institutions that are verifying the data thousands of dollars.
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