The mortgage industry is a relatively slow-paced industry when it comes to its various stages and processes. There’s a lot of friction between each stage that makes it cumbersome to issue a loan. However, with the advent of blockchain technology, the industry has been revolutionized to quite an extent. 

Here’s how:

Blockchain technology is rapidly penetrating several industries such as finance, fashion, pharmaceuticals, and more. It can do so because of its efficient functioning structure that makes processes simpler, faster, and more reliable.

Blockchain technology is acting as the fundamental framework upon which businesses are building their processes. The mortgage industry, being one of the slower sectors, has immense scope for improvement. Blockchain can cause this improvement by paving the way for a digital mortgage.

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Blockchain for Mortgage Industry:

Conventional Mortgage Process

In a conventional scenario, there are several steps involved while getting a mortgage. First and foremost, one has first to be eligible to apply. They then have to fill an application which will later be verified. Once all this has taken place, and it all goes right, a loan would be approved and sanctioned. 

This is a long process that easily takes about a month to two. During this, several actors are involved at various stages, which gives room for many inefficiencies and risks. 

There’s a lot of time taken, there’s a risk of improper documentation, and since it is all manually done, there’s a lot of room for human error. These challenges can be solved using blockchain.

Mortgage Process Using Blockchain

One will first fill an application which will become a block. The application will be verified by not one person/authority but several nodes. After the verification, this said application will be added to the chain. 

The person will then need to sign and accept this loan, following which funds would be transferred to them from the entity supplying it. So, a process that takes at least 30 days will finish in a matter of days and is made entirely digital.

Thus using blockchain tech as the base framework, mortgage software, and consumer lending software can be developed.

Benefits Of A Digital Mortgage

Better Record-keeping: Each step of the process is stored as a record, and these records are on a decentralized ledger. This means there’s no one central hub that manages it all. Thus, there’s proper proof of all the actions that is quite difficult to tamper with. So, it becomes easier to verify all actors such as the loan borrower, the seller, and entities that approve the loans.

Cost Efficiency: It becomes relatively economical for one to get a mortgage compared to the conventional process, where they’d have to pay a third party to streamline the process. Here, they can do it all on their own, without any intervention from an outsider.

Instant Settlements: Usually, transferring funds takes time. With this, the person will get their funds right away without having to wait. 

Smart Contracts: A smart contract is a set of rules that are automatically set in motion when an event occurs. It can be applied in the verification and approval process such that the rules are initially fed along with criteria. 

If the application follows these rules and meets the criteria, it is approved, else it’s not. This way, the complete verification process can be executed automatically instead of manually carried out by multiple actors.