Applying for a mortgage is a significant milestone, one that the millennial generation is fast approaching, or has already met.
It’s a part of the human experience…
You go to school;
get a job;
Take out a mortgage; and finally
buy a home.
Considering it’s a process that so many have to go through, one might think it would face more pressure to innovate. Unfortunately, the industry is largely centralized and controlled by a handful of institutions. Which has created an environment that stifles innovation, and protects the best interest of the key stakeholders, not the consumers. Further, the centralization of this industry has lead to disastrous events in the past, i.e. the black swan event of 2008 that was largely attributed to NINJA (No Income No Job Applicants) getting loans that they shouldn’t have been getting, and those loans being packaged up in CD’s and sold to consumers.
The stakeholders in this industry have already shown that they’re not the most trustworthy in the world.
If you’re unfamiliar with how the last financial crisis occurred, and how it was attributed to the housing market, check out the movie “The Big Short”.
Michael Scott called it.
What are Mortgages?
Mortgage: a legal agreement by which a bank or other creditor lends money at interest in exchange for taking title of the debtor’s property, with the condition that the conveyance of title becomes void upon the payment of the debt.
Mortgages are loans that you can take out when attempting to purchase a home. They allow people the opportunity to buy properties without making a full payment upfront. Only a small percent of the global population can afford to pay for a home in one lump sum, the majority of aspiring homeowners are obliged to make payments based on a predetermined arrangement between a bank and broker. With a mortgage, it may take years for the loan to be paid off, and if the borrower is not able to pay the mortgage on time, the bank who lent the capital has the right to pursue foreclosure.
Why are they Broken?
While many people have successfully owned properties with the help of mortgages, there are many challenges that still plague the system. Challenges that can be linked to the fact that the mortgage industry is old and archaic in nature. Furthermore, acquiring mortgage loans is expensive and time-consuming. There are countless hours of labor put into underwriting mortgages, and there’s a lack of alignment between lenders, brokers, and lendees — which causes distrust and process inefficiencies. The traditional mortgage system has a centralized functionality, which grants the mortgage company more power and control over the processes. I know what you’re thinking: “Middle men?”, “Centralized?”; sounds like something that can genuinely be improved through implementing a blockchain-based solution.
How can we fix them?
Block66 is a blockchain-based mortgage platform that will function as a hub for brokers and lenders to deal with loans/mortgages. The company facilitates an alignment of interests with respect to the lenders and borrowers. In contrast to the traditional mortgage system that is opaque, slow, and creates distrust: the blockchain-based mortgage system will be transparent, fast, and more accesible. Furthermore, the platform is designed to ensure that both parties are well aware of every part of the process, while also eliminating the time-consuming elements of it. The funding of a mortgage loan with Block66 takes 2 days, as opposed to 45 days with the traditional mortgage system.
Block66 was created to deal with the irregularities experienced with the traditional mortgage system, with the aid of blockchain technology. Blockchain is a distributed ledger technology that has various abilities, including being able to be used for securing documents with the aid of the high-grade cryptography. It also ensures the authenticity of processes within the network. One of the reasons that the process of applying for a mortgage loan has remained as archaic as it is, is because the documents you are required to submit to apply for these loans typically contain very sensitive personal information. Some people don’t feel comfortable going through this process online, as they don’t see it as a safe way to share their information with the banks that are underwriting it. By adopting the blockchain technology, Block66 mortgage platform will have enhanced document security, 100% transparency, smart contracts for brokerage, and virtual underwriting (that benefits everyone involved in the process by saving time and money).
Basically, the platform automatically connects people who need mortgage loans with lenders on the platform. While smart contracts will serve as the broker/lawyer to ensure that there is no defaulting on the contract.
This is a revolutionary innovation that will bring positive change to the mortgage market, for both consumers and current key stakeholders. It’s rare that you find a project that creates a true win/win solution for everyone involved in the industry, Block66 does just that.