Mortgage Over Blockchain

 

What is Blockchain in mortgage?

How does a Blockchain mortgage work?

Can I buy a house with Cryptocurrency?

Can I use Bitcoin for down payment?

Does Coinbase affect mortgage?

 

 

What is Blockchain in mortgage?

·       Without middlemen, blockchain provides lenders with competitive loan offers and secure transactions. 

·       Blockchain-based smart contracts ensure that both loan seekers and lenders agree to fair and feasible terms regarding things like proof-of-funds and payment planning.

 

How does a Blockchain mortgage work?

 

·       By automating and securing the mortgage lending processes, a blockchain-based system co-ordinates and identifies the agents and intermediaries and could reduce operational costs, fees and fraud for financial institutions.

 

Can I buy a house with Cryptocurrency?

 

·       Home buyers will generally have to convert crypto assets into cash to use them for the down payment on a home. He couldn't just transfer over the crypto investments or show his account on Coinbase to satisfy the lender and his title company.

 

Can I use Bitcoin for down payment?

 

·       You may be able to make a down payment or purchase a house outright with Bitcoin, but you can't use it to pay the mortgage. U.S. mortgage lenders and servicers accept payment only in dollars. That may change someday, but right now, there's no incentive for them to accept Bitcoin.

 

Does Coinbase affect mortgage?

 

·       No. Coinbase does not report any loan-related information or activity to credit reporting agencies at this time.

·       Heard of Bitcoin and other cryptocurrencies?

o  Perhaps you’ve noticed the price of Bitcoin keeps going up, and that some people are excited about its potential.

·       Average person has heard of Bitcoin,

o  most people don’t have a good grasp of how it works. 

o  About 83% of people say they are slightly familiar with or not at all familiar with cryptocurrency.

 

Bitcoin and other alternative currencies depend on a technology called blockchain. Although people often assume blockchain and cryptocurrency are the same, the reality is that blockchain has additional applications beyond money.

Blockchain technology can help streamline the mortgage industry by improving efficiency and making the mortgage process more affordable.

 

How Could Blockchain Mortgages (गिरवी) Work?

·       Although the use of blockchain technology and blockchain accelerators aren’t yet standard in the mortgage industry, they show promise.

·       To understand the benefits of blockchain mortgages, it helps to have a full appreciation of what takes place during the traditional mortgage process and how long the process takes overall.

 

What Happens During the Traditional Mortgage Process?

Depending on the season and how many people are hoping to buy a home at any given time, the time it takes to receive a mortgage using the traditional method is anywhere from 30 days to about 60 days. Below are the typical steps involved in getting a mortgage.

 

·         Prequalification: During prequalification, a mortgage lender looks at your credit and gives you a quote.

·         Application: The next step is to move forward with an application. Usually, a home buyer will complete the Uniform Residential Loan Application. The form details your employment history, income, assets and other relevant information a mortgage lender would need to approve or deny your application.

·         Processing: The next step is loan processing or verification of all the information on the application. Part of loan processing also includes appraising the home you want to buy to confirm it is worth at least as much as what you’re paying for it.

·         Underwriting: After the loan processor has reviewed everything and given a mortgage the go-ahead, it’s still not ready. Things then get passed to the underwriter, who takes a look at all the information and finally decides to approve or deny the loan. Specifically, the underwriter is evaluating the amount of risk involved and determining whether a person is potentially a risky borrower.

·         Settlement: If the underwriter gives the mortgage a stamp of approval, the final step is settlement or closing. After the settlement, the mortgage finalizes, and the buyer can move into their new home.

 

Here are some of the benefits of Blockchain for the mortgage industry:

 

Increased Transparency:

 

·       Once data is uploaded to Blockchain, it is available to everyone in the network.

·       All the parties involved are aware of the status of a particular request and the data related to it.

·       The buyer doesn’t need to provide the data again.

·       Thus, Blockchain implementation can create high levels of trust, reduce fraud, and improve credit qualification.

 

Reduced Costs:

 

·       It is expected that Blockchain can scale down total settlement time throughout.

·       As it is a peer-to-peer network, the fund disbursement time can be significantly reduced. The facilities can be leveraged in minimum time and effort.

·       Thus, the transaction cost can be reduced significantly along with intensifying customer experience, thereby adding one more benefit of Blockchain to the mortgage Industry.

 

Process Automation:

 

·       Blockchain does not need intervention from any third party to verify the process.

·       If the intended party is ready, the mortgage process goes on. The mortgage process can take place without visiting the bank or the actual location of the property.

·       With one click, the request could be sent to the relevant authority and consolidated accordingly, which could further be approved or rejected.

·       It would help to better investigate and analyze relevant documents for claims and check for authenticity. As the process is streamlined, it would remove redundancy of mediocre intermediaries. The chances of follow-up on repayments would improve.

 

Prevents Frauds:

 

·       Blockchain would be more reliable as it does not have a central point of failure thus withstanding trespasser attacks.

·       Even the property valuation is validated, thus removing chances of reselling the property again.

·       Once data is stored in Blockchain, no one can tamper with the data as it is immutable – thus preventing intruder attacks.

·       There are immense benefits of Blockchain. We will understand this concept further with an example of mortgage services. The whole mortgage process is explained in the diagram below.

·       This arrangement not only makes the mortgage process faster, but also saves a lot of organizational costs.

Mortgage Process Flow

The process flow for Mortgages is given in the steps below –

·       Buyer applies for property valuation to mortgage solutions

·       Property valuation report is validated according to business rules using smart contracts and is submitted to Mortgage

·       Mortgage solutions forwards the request to the Buyer

·       Buyer applies for a loan to the bank

·       Bank requests the generation of a report to Title Search and Municipality

·       Mortgage smart contract redirects requests automatically to the respective parties

·       Title search report is created and submitted back to Mortgage

·       Tax report is prepared and submitted to Mortgage

·       Smart contract checks the reports and forward it to the Bank

·       If all the conditions are valid, the bank approves the loan

·       Buyer and Seller sign the required agreements

·       Agreements are submitted to the Bank

·       Sales Proceeds and Loan is disbursed to the Seller’s Bank

·       Seller’s bank credits the Seller’s account