Blockchain technology is being touted as a mortgage game changer. Everything from paperless mortgages, no salespeople, no commissions and crowdfunding your next mortgage on the blockchain is the latest media rage.
Soon we may see real estate transactions, mortgages, and business loans all handled on a blockchain.
But will this new billions dollar technology live up to all the hype?
A recent report by Moody’s on new technologies on the U.S. housing sector spotlights how blockchain can streamline key mortgage processes, eliminate redundancies and reduce costs.
According to the report, blockchain could “improve the monitoring of loan performance while boosting the degree of transparency throughout a mortgage’s lifecycle, allowing “mortgage insurers to transfer discrete mortgage credit risks to reinsurers and other alternative capital providers on a cost-effective basis.”
The main cost reduction would be in personnel and commissions.
For example, blockchain would cut out the need for a middleman or salesperson and provide small investors looking for a somewhat steady income from a collateralized investment. Hypothetically, commissions and operating costs would be dramatically cut for the lender and banks and these savings would be passed to the consumer in the form of lower loan processing costs, interest and mortgage rates.
Great for the lenders; good for the investors; good for the consumers; but not so good for the salespeople in the middle…
Moody’s estimates these expenses could be reduced by 10-20%, which would equate to approximately $840 million-$1.7 billion in savings annually.
The report stated that while innovation in the years since the financial crisis has transformed a range of industries, “housing has been mostly untouched.”
The researchers said that some projects are underway to incorporate blockchain technology into the housing sector. The had wrote;
“One of blockchain’s current limitations is the small number of transactions that can be processed within a period of time based on the restricted size of the blocks and the high costs of using the technology.”
“Regulatory agencies want to ensure that those solutions do not create new risks for individual firms or the industry.”