Page 18 - February 2018 Disruption Report Flip Book

THE FUTURE FINANCIAL INFRASTRUCTURE FJEABNRUUAARRYY 22001188
BLOCKCHAIN COULD TRANSFORM THE CURRENT MORTGAGE VALUE CHAIN
Blockchain has the potential to transform mortgage servicing because it re-imagines finance from the customer’s perspective and automates economic value and legal information exchanges. Imagine loan origination, credit qualification, security appraisal and insurance, loan funding confirmation and title transfer all occurring with as little human intervention as possible. That is all possible in the next 5-10 years.
Ultimately, this technology will also fundamentally change the way mortgages are sold in the secondary market. Smart contracts can streamline how Master Servicers Agreements, Investor Contracts, and Pooling and Service Agreements inform these securities, adding efficiency and speeding up settlement times. Mortgage servicing rights will be traded more quickly—enhancing the market’s liquidity—as a result of the blockchain’s transparency.
Blockchain techology is expected to reduce the transaction time throughout the mortgage value chain by 25%—from 40 days to 30. After a national blockchain-based title registry is in place, the transaction time is expected to fall an additional 25% to 20 days.
In addition to reduced transaction time, blockchain technology—and specifically the use of smart contracts in mortgage lending has the potential to reduce costs for both consumers and lenders. “We also estimate that mortgage customers could expect a 11% to 22% drop in the total cost of mortgage processing fees charged to them in case smart contracts are adopted,” wrote Capgemni Consulting in a report on smart contracts. “In absolute terms, this amounts to savings of $480 to
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