In debates over a 2021 infrastructure bill, blockchain tax is contested ground. Cryptocurrency proponents are keen on keeping the crypto mining and development communities in the United States. Heavy regulations and taxes could run the risk of tossing the baby out with the bathwater, they warn. Overbroad taxation could suppress the evolving blockchain technology that supports smart contracts.
The issue matters to the world of titles and mortgages. Here, we note some evolving use cases for blockchain — especially in the mortgage sphere.
Keeping Track of Mortgage Loans and Servicing Rights
Mortgages — especially from big banks — are constantly resold on the secondary market. These deals may be common practice, but they can have big pitfalls. Underwriting the same debt repeatedly can create tangled information trails. And people have lost their homes because of failures to track mortgage debt transfers. This is why registration systems now track the selling of mortgage debt.
What if mortgages were etched on the blockchain as a normal practice? Proponents say the problems with tracking loan transfers would be solved — for investors in debt, and for borrowers.
Stepping Up the Prevention of Wire Fraud
Of course, a buyer wants to open an email from the title company and read the instructions for wiring the money to close on a home. Sophisticated scams are issuing instructions that match previous agreements between buyers and their mortgage and title consultants. Buyers are quick to follow the instructions in the rush to closing. Closing funds diverted to scam accounts are not easily regained.
Wire fraud attempts now show up in a third of all home and mortgage transactions. And closing scams now account for half the monetary losses from cybercrime.
Could blockchain technology install foolproof authentication and fraud detection? If so, it could relieve a major pain point for title companies.
Gearing Up to Simplify Mortgage Shopping
Borrowers can now choose from several data-encrypted, blockchain-based platforms to shop for title insurance, apply for loans, make and track payments securely, and work with providers through smart contracts. Smart contracts are real-time agreements that verify and record transactions without banks.
Consider these innovators:
Radian
The American Land Title Association (ALTA) points to Radian, with its direct-to-consumer title insurance and closing services. In Florida, Titlegenius offers a Radian portal through which shoppers use a suite of tools including remote document notarization and check capture. ALTA calls Radian “a transparent and secure way to order.”
Radian is also in the business of reviewing title commitments, spotting issues in the chain of title, and curing title defects.
Unchained Capital
Unchained Capital lends money to people with established bitcoin accounts using secure, private keys. The company says its mission is to make sure “everyone can secure and maximize the value of their bitcoin holdings over multiple generations.”
Customers take out bitcoin-secured loans for three to 36 months, at rates ranging from 11% to 14%. The company promises “loans up to $1,000,000 approved within the same week” for real estate purchases, small business needs, or personal use.
Figure
Figure offers Provenance blockchain-based refinancing. The borrower still needs an approved credit profile, appraisals and loan documents, and must pay fees for settlement and recording — so intermediaries are not replaced.
Yet customers take charge of their applications remotely, and can lock in rates day or night. Remote online notarization of documents helps to provide approvals “in minutes rather than days.” Artificial intelligence assists in pre-qualifying borrowers for credit lines. Mortgages for home purchases are coming soon.
☛ The Covid-19 pandemic galvanized the real estate industry to adopt remote technologies. Learn more here about three key technologies: eRecording, eNotarization, and Remote Online Notarization.
Creating Customer Advantages With Blockchain-Based Data Storage
Privacy controls in blockchain transactions can benefit customers in several additional ways. Keeping data on the blockchain can stop companies from harvesting leads from our personal financial data. Blockchain technology can also cut out processing fees and shorten the waits for loan approvals from weeks to days, or even minutes.
As the above-listed companies show, blockchain credit and mortgage lending is already here. Blockchain’s integration into county auditors’ and recorders’ offices is still mostly an aspiration. Yet pilot projects have shown its potential throughout the title conveyance process.
☛ Interested in blockchain’s potential in deed recording? Learn more at The Real Estate Deal, Decluttered: Blockchain and Deed Recording.
Supporting References
ALTA Title News: Radian Unveils New Portal to Aid Purchase Title Insurance, Closing Services (Jun. 15, 2021).
Michael Nabati for HackerNoon.com: Blockchain as a Replacement to The MERS (Mortgage Electronic Registration System) (Aug. 9, 2019).
Neil Patel: How to Use Blockchain in Marketing Data Security (undated).
Victor Liu for The View From 10,000 Feet: The Clear Skies Title Agency Newsletter: The Impact of Blockchain on Real Estate (Jul. 2021).
Nexval: Blockchain Technology & The Mortgage Industry (undated).
Sam Daley for BuiltIn.com: Buy Your Dream Home With a Blockchain Mortgage: 11 Companies Using DLT for Lending and Credit (updated May 9, 2021).
Photo credit: Pexels, via Pixabay