3 Proofs That Blockchain Will Soon Revolutionize Mortgage Lending
Blockchain is one of the hottest tech topics globally, there are seemingly endless applications of this technology and that has contributed greatly to its popularity.
There have been some great applications of blockchain in top companies that are in a variety of finance subsectors.
One great example of this is the application of blockchain in mortgage lending. Ever since the focus of blockchain developers shifted to mortgage lending, there has been some positive growth signaling a huge revolution up ahead.
What is the proof that indicates that blockchain will soon revolutionize this field? Here is some concrete evidence to back this up:
Disintermediation Of Mortgage Lending
The current mortgage lending field has many intermediaries that applicants have to deal with before getting their loan approved. These intermediaries are third-party service providing companies that help with various stages of getting a mortgage. Although the intermediaries involved in mortgage lending seem like a necessity, blockchain developers beg to differ.
They believe that mortgage lending could be much more efficient and trustworthy if it were not for those third-party service providers. Such service providers include legal representatives, underwriting firms, and other third-parties.
The most common downside of having such intermediaries is the costs incurred when applying for a mortgage. Both customers and lending institutions might incur a lot of costs when paying for services rendered by these third-parties.
That makes this mortgage lending model inefficient and possess inconsistencies. To resolve all of them, blockchain has offered a very powerful solution of doing away with all third-party intermediaries. The best essay writing reviews highlight that by using disintermediation in this field, both customers and lending companies can save thousands of dollars when applying for a home loan. Blockchain uses smart decentralized technology systems such as the Distributed Ledger Technology (DLT) and smart contracts.
When these two technological systems have been used conjointly, they can help remove any and all intermediaries involved in mortgage lending. Removal of these intermediaries can dramatically reduce costs when applying for a mortgage. Centralized systems that are currently being used by traditional mortgage lenders have bottlenecks that make this process costly.
That is why a decentralized system makes applying for a mortgage cost-effective because it does not require jumping all legal and underwriting hoops. All the information that needs to be acquired from third-parties can be made available on the transparent DLT that mortgage lenders can use.
Other intermediaries such as those found in the middle of mortgage lenders and banks can be also be removed. There are some countries and companies that are currently piloting this blockchain-powered mortgage lending system.
By using bits and pieces of blockchain here and there, they are hoping to gradually improve to having a fully blockchain-powered lending system. Hopefully, soon enough, these systems will start being mass-produced and implemented all around the world. For now, you can be thrilled that the development of this type of technology is starting to take form and might be ready for full-scale implementation at any time.
A real estate legal expert at law essay writing service says that an average mortgage loan application can easily take up many weeks depending on the lending company and local laws. Waiting up weeks just to hear the verdict of whether your mortgage loan was approved can be heartbreaking and unnecessarily time-consuming.
That is why an expedited system of verifying applicants and letting them know instantaneously whether they have been approved or not was a great need. How was blockchain used to solve this problem? Blockchain technology was designed to work in a fast-paced environment with data streaming in from multitudes of sources. Each piece of data stored on this blockchain DLT can be retrieved instantaneously whenever needed and displayed to the appropriate parties.
At the same time, uploading data can also be done in a fast-paced manner. These features make blockchain DLT a prime solution for expediting verification on mortgage applications. A technical writer for a custom essay service says that one of the most common reasons why verification takes so long in traditional mortgage applications is because of the number of third-parties involved. Data needs to be manually collected from them when needed, which increases the time it takes to verify applicants. Even when valuing the house, that takes a lot of time because a valuation needs to be conducted and so forth.
Whereas all these problems could be resolved by simply storing the latest and relevant data on the blockchain DLT. When a customer applies for a loan, they can retrieve all information stored on this digital ledger. For example, the latest house evaluation can be found readily available on the DLT system and all other supporting legal documents. Everything needed to verify and complete the application process can be found instantaneously and used to make a decision right then and there.
As mentioned in reports by dissertation writing services, the mortgage lending customer experience can then be significantly improved and companies can meet monthly targets easier. Expediting this type of lending can only be done using these secure and transparent systems that can be used to automate mortgage loan applications.
Expediting the process for mortgage lending also has a lot to do with removing intermediaries mentioned above because they also create a timeframe bottleneck. Using DLT can dramatically improve current lending systems and some companies have already started implementing this technology.
Limiting The Risk-Exposure Of Data Collection
The collection of data has always been of great concern amongst both companies and consumers. If companies collect data they do not need, they’re risking infringing privacy regulations. For mortgage lenders, there is very little they can do about this.
That is because they need updated and latest information about applicants and properties that are going to be part of those loans. Therefore, they constantly need to collect data that they’re going to use to either approve or decline a loan application.
However, this creates security concerns for them because they might have a breach and sensitive information can be stolen from them. Not to mention the costs of storing that data and maintaining it to be up to date. Also, collecting data from third-parties is very costly.
All of these factors were signaling a call for help and blockchain developers responded to this outcry. Currently, storing information on the blockchain is very secure and it is nearly impossible for hackers to crack into this system. That is because it is decentralized and does not have a single storage location.
Thus, this reduces risk-exposure and liability in the event of a security breach. Also, storing information on the blockchain can make it easily accessible and third-parties can contribute to keeping that information up to date. For example, if there is a change of ownership on the house, this information can be added as a different block on the blockchain.
Instead of removing the last piece of information to add new data, a new block is added. That helps maintain perfect records and promotes transparent working procedures. Companies can then have access to crucial data at any point without having to approach third-parties directly. At the same time, companies will not have to maintain servers that could be hacked, resulting in losing sensitive data.
Blockchain can service mortgage lending in this manner by providing an impenetrable storage location that is decentralized and has no security defects. That can help improve compliance of privacy policies established by the local government and within your own mortgage lending company.
The Bottom Line
Blockchain is revolutionizing all industries on this planet and mortgage lending was no exception. Companies can improve their working systems to provide a great user experience that provides instantaneous verification. That saves both customers and businesses a lot of time.
Using blockchain also promotes transparency and that removes all intermediaries that add unnecessary costs and time to this application process. Lastly, blockchain is virtually impenetrable and that provides world-class security for the data you need about customers.
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