How Significant is Blockchain in the Mortgage Industry?

The mortgage process is heavily centralized and permeated with middlemen who each add their own markup to the overall costs, a perfect target for blockchain.

The bank can then notify the buyer and solicitors of its decision, after which arrangements are made for the signing of the mortgage loan agreement and mortgage deed.

Once a mortgage is approved, this same information needs to be updated with every agency, i.e. the title deeds need to show that the property has changed hands, the bank will now keep a record of the mortgage against your name so credit agencies can access this in case of future loan applications.

How can blockchain be applied to the mortgage process?

Smart contracts can be pre-programmed to only execute upon completion of certain conditions, such as requesting funds to be released to the seller only once the mortgage documentation has been digitally signed, the borrowing bank has approved the mortgage and funds have been transferred to the seller's bank.

The Chinese State bank, Bank of Communications, used Blockchain to issue digital mortgages worth $1.3 Billion in September of 2018, while the world's fourth-largest bank, The Agricultural Bank of China issued a loan worth around $300,000 for agricultural land on a blockchain network.

In Russia, a subsidiary of the Raiffeisen Bank International issued an entirely digital mortgage through a blockchain platform called Masterchain, an Ethereum-based platform launched by the Bank of Russia that ensures fast and secure communication between banks and other financial institutions, and allows users to quickly confirm the accuracy of customer data.

There are also a number of startups that are using blockchain to streamline the mortgage application process.

What Clayton means is that certain regulations and laws apply to a mortgage transaction, irrespective if that mortgage is issued through traditional channels or on top of a blockchain network.

The fact remains that blockchain has the potential to revolutionize the mortgage industry and it is a use case that will benefit both parties at either side of the transaction, i.e. the customer and the financial institutions.