Cryptocurrencies will be around for a long time. What began as a small group of technologists in the aftermath of the 2008 financial crisis has grown into a thriving and innovative ecosystem. Every day brings news of seminal developments in the cryptocurrency community, from retailers accepting bitcoin to financial institutions developing blockchain-based smart contracts.
The most intriguing possibilities are how cryptocurrencies can help make the mortgage process more efficient and, as a result, more cost-effective. With mortgages becoming more expensive, lenders would be wise to use blockchain-based solutions to keep costs under control, which they can then pass on to consumers.
Here’s how this technology could change the industry and help borrowers realize their dream of home ownership.
- Enhance the efficiency of the mortgage application process:
Mood’y estimates that blockchain technology could save $1.7 billion in mortgage costs per year. According to the authors of this report, this technology has the potential to “streamline mortgage processes, eliminate redundancies, and reduce costs.” Borrowers would have more transparency if this technology was used because they would know where their loan applications were in the process.
Smart contracts could be used by the many parties involved in an origination. That is, loan consultants, processors, and closing agents would all be connected to the same distributed ledger that was used in the overall transaction. All parties involved in the transaction would have a better understanding of the loan’s situation.
- Streamline mortgage servicing:
Obtaining a mortgage loan is one thing. However, you must continue to pay your servicer for the next 30 years. Many of these services use antiquated payment tracking and management systems. Consumers could pay their mortgages with digital payments that could be instantly synchronized and reconciled by leveraging blockchain.
Instead of paying with a check or ACH, homeowners could use a servicer’s blockchain-powered payment platform. Of course, the servicer would have to update its technology, but the investment would be worthwhile to improve payment efficiency. These streamlined payments may make it easier to trade Mortgage Servicing Rights (MSR), resulting in more liquidity in this market.
- Create a national title registry:
There may be an opportunity to establish a national title registry that is managed and distributed using blockchain technology. This would hasten the mortgage-origination process because updates to the national registry would be more seamless.
In South Burlington, Vermont, for instance, there was a trial of an Ethereum-based ETHUSD, -0.04 percent blockchain title registry. While such a national registry is still years away, blockchain technology represents a promising avenue of innovation for this stage of the mortgage origination process.
The price of bitcoin BTCUSD, 0.01 percent, and other cryptocurrencies may continue to make headlines. But don’t overlook the incredible ways in which the underlying blockchain technology could help transform the mortgage origination process to better serve homeowners.
