Owning a home is a dream for many people. It is also one of the most expensive purchases in life. To help with the cost, homebuyers apply for loans from banks and financial institutions, but the mortgage origination value chain is a complex process. Gathering data to determine whether to originate a loan is a multi-party engagement, and implementing changes to an application and its operating procedures can be complicated.
Key industry issues for mortgage loan origination include:
- Increased loan production cost, decreased net gains for lenders
Multi-party coordination, multi-level executions, and complex reconciliation procedures result in huge time delays.
- No standard rules and regulations for storing land records
Whenever there is a change in ownership, searching, validating, and scanning land records from government databases becomes a tedious activity.
- Difficulty verifying documentation
Any misrepresentation in the base documentation—especially income of the consumer, occupancy and property details, undisclosed debts and identity details—which form the key parameters, results in false loan approval and disbursement.
- Limited access to documents
Duplicate copies for data and documents are maintained by various independent parties with different patterns and procedures.
- Lack of transparency in the execution process
Limited visibility of data management leads to poor user experiences and lowered customer satisfaction.
Now, blockchain technology is being recognized as a viable solution to these challenges.
Blockchain technology can help eradicate all the key issues in mortgage origination by means of distributed ledger framework, which provides a list of benefits and capabilities:
- Multi-party transactions with decentralization capabilities
- No intermediaries
- Security assurance
- Improved transparency
- Lower transaction costs
- Covert from a centralized to a distributed trust
- Empower automation using smart contracts
Mortgage Origination Ecosystem