The promise and potential of Blockchain in the mortgage industry has become increasingly apparent, as more and more people in the industry are developing an understanding of what exactly it is and what it can mean for them in terms of data collection and retention — and as various players big and small are testing it out on a limited basis.
That’s the take from Debbie Hoffman, an attorney and founder/CEO of Symmetry Blockchain Advisors. She spoke with Mortgage Media’s Dave Matthews during the MBA’s National Secondary Market Conference & Expo in New York, and her message, boiled down, is simple: “It is a game changer for the way we collect information.”
“When I started my career, I was a lawyer and I would look at loan files that were being sold, and literally we would sit in a room and we would look at all the documents that went into the loan file and see all the missing pieces of loans and data,” Hoffman said. “And when I first saw Blockchain I said, ‘Wait a minute, we wouldn’t have missing data because there would be no collaborative loan files to have to look through.’”
Following are the highlights of their conversation:
What is Blockchain?
Blockchain is a technology protocol that originally came about years ago when Bitcoin was introduced, Hoffman said — it’s the technology underlying Bitcoin, and it has been applied across all types of industries throughout the world. It is, at its core, “a digital ledger of record-keeping.”
“Basically what it is is it’s a technology platform where you can gather data in what’s called a decentralized database, so not a centralized server, and you can collect the data — it’s time and date-stamped so you always know when the data was entered; you can share the data among various parties; and there’s many other characteristics of this technology protocol that are extremely helpful to our industry, among other industries,” Hoffman said.
It’s a protocol that can be used among “untrusted” parties — parties that aren’t within one company, for instance — in the life cycle of a loan, from origination through closing and servicing, and more. “You can use this platform among all those parties without having to transfer data from a drive among parties,” Hoffman said.
Calling it “a perfect supply chain of information,” Hoffman suggested that that the chain could begin even earlier than the point of sale — “some might even say that you could start it earlier, with the realtor, and moving into origination.”
Are we getting serious about this tech?
Two types of companies and entities are exploring Blockchain in a serious way, Hoffman said. First, there are the large players — money center banks, the GSEs, the larger tech companies — which are researching it and using it among small test cases to see if there it could have a bigger impact. Then there’s the other end of the spectrum, small fintech companies quietly building platforms — and building traction. They will grow, Hoffman said — predicting they will get bought out by the larger players once they are more fully developed.
“Today I think there is an appreciation that this really is a technology that people should understand, and will start to understand, and start to learn about and how to apply it to their businesses,” she said.
Any one company taking a lead?
In one sense, it’s questionable whether a single company taking a lead role is in keeping with the concept of Blockchain — protocols of untrusted parties with access to the common data. Though it’s likely that a large player — as noted, a large money center bank, tech company or GSE — would be at the center of the “ecosystem,” Hoffman noted, collecting the data and partnering with lenders: The company would be the center of the system, with all the collaborative second and third parties having access to the information.
What are implications?
Blockchain could essentially eliminate the post-closing headache, Matthews noted: “checkers checking checkers checking checkers.” “Eliminate” may be too strong a word — data still will need to be checked over, and to what extent will depend on what one is comfortable with, Hoffman pointed out, but there will indeed be less of a need for a continual review.
When you put data in the blockchain, you still need to make sure it’s correct, Hoffman noted: Someone has to check for wrong addresses, typos and such. But once the information is there, it’s not going to change — or rather, if you make alterations, it will show when they were made and what they were; anyone can see what was entered, where it was corrected and what it was corrected to, adding a sense of transparency, Matthews observed.
“You can’t erase things, it’s always there in perpetuity,” Hoffman said. “Or, I mean, you could branch off and have things that wouldn’t be part of the blockchain that you could erase, but for the most part if you want information to be in the blockchain, it stays there forever. It doesn’t mean that you can’t change things, it just means that you would see where they were changes.”
At any rate, if you put information to a loan and then sell the loan, the information won’t change, Hoffman noted.
“The question that I do think is still out there is that there has to be a comfort level among the parties that the original information that was put in is correct and was checked correctly by that original party,” she said. “But there’s much less of a need for having to check over and over and over again.”
Applications for title processing?
Matthews observed that title processing for real estate sounds tailor-made for Blockchain, noting that in his view, real estate title processing should be akin to processing for cars: You have a title, and then any activity associated with it is recorded on that title.
Hoffman concurred, noting Blockchain’s nature as a chronological digital record-keeping ledger of information is used by many parties repeatedly.
“So, a ledger like Blockchain is not appropriate if you’re only going to use a piece of information once and then throw it away, such as the amount that you’ve funded in a one-time escrow. That wouldn’t necessarily be applicable. But in title, where you have this ledger that goes in perpetuity on a piece of — whether it’s a car or whether it’s land, and you’re entering this information, absolutely, it’s a perfect place,” she said.
Would this be a major disruption for title insurance — would such insurance still be needed? Maybe, maybe not: It may depend on a company’s comfort level; some may want to buy insurance for added assurance and protection, even with confidence in the accuracy of the information on the Blockchain. “But the actual underlying way of recording the land records the title companies might use would be what’s the changing factor,” she said.