Accessing traditional mortgage loans are becoming more complicated especially for millennials most of whom are disadvantaged because of their student loan burdens.
This happens as a result of the lenders, mostly banks, in this case, doing everything they can to ensure that loans given out are secure with every possibility of due repayment.
With the advent of Blockchain technology to different industries, Mortgage just may be an extremely relevant case.
Traditional Mortgage is complex
With shelter being such an important element to humankind and survival, the increasing complications in the processes of mortgage acquisition is quite ironical. Acquiring one’s own home through mortgage involves a legal agreement by which a bank, building a society, etc. lends money at interest in exchange for taking the title of the debtor’s property, with the condition that the conveyance of title becomes void upon the payment of the debt.
Implementing the above system requires so many processes that determine the security of the loans involved. Therefore, a lot of paperwork come to play, involving a network of several different institutions and platforms. These practices all boil down to gathering provable information about the parties involved, most especially the borrower and all connected intermediaries. Hence, a lot of investigation and data analyses are usually involved, claiming significant duration of time and other resources, as the case may be.
P2P transactions eliminate complexities
Having all the required data on one platform and being able to interact directly in a peer-to-peer fashion is a practice that will go a long way in reducing cost and speeding up the processes involved in mortgage application and acquisition. Prior to this time, this kind of practice would appear impossible, but thanks to blockchain and the efficient data management and processing ability that it enables. This makes it possible for both borrowers and lenders to interact directly in a transparent and secure manner.
An existing example of blockchain implementation in the mortgage industry is by Homelend.
The P2P business model that is being developed by Homelend will allow borrowers to apply for mortgage loans in a more efficient way, and to access new channels for financing their homes.
Many borrowers who currently find it difficult to get a mortgage loan (especially the millennial generation) will have an alternative way of obtaining a loan. Lenders will find an interesting low/moderate risk investment opportunity, which will offer higher yields than bonds or mortgage-backed securities.
Itai Cohen, CEO of Homelend says:
“By developing a decentralized, peer-to-peer mortgage lending platform Homelend will serve two significant purposes that includes modernizing the age-old mortgage lending system in order to make it efficient, cost-effective and customer-centric, and expanding homeownership opportunities for a new generation of borrowers, meeting their distinct lifestyle and needs.”
Taking advantage of the blockchain
Due to its distributed nature, a blockchain ledger can significantly ease the transfer of and access to information for each of the parties involved in the mortgage value chain. Also, with its unique capability to generate trust, transparency, and record immutability, it is an effective move toward digitization, not only of mortgage documentation but of all related business processes.
In a traditional non-blockchain scenario, databases are handled by a single organization. For instance, a bank has a record of the amounts deposited by its account holders. Were someone able to hack the system and modify the database, he would also be able to steal a large amount of money (of course, banks have many security measures to counter these attacks)
Blockchain implementation eliminates the need to trust any third party as the information and transactions are carried out on the secure and transparent platform. Beyond security, the flexibility that the system offers enables borrowers to easily access crowdfunds during loan acquisition, while lenders are provided with the opportunity to holistically access investment opportunities directly and quickly as well.
Hence, as fundamental as the issue of housing is to humankind, making the shelter more easily accessible is a crucial revolution that the blockchain would effectively facilitate by eliminating the existing complexities.
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