Google “blockchain next big thing,” and over 2 million results pop up. Many articles on this topic are hot off the presses in 2017, and they’re not just in tech industry journals but also in top business publications from Fortune to The Economist.
Will these predictions of blockchain taking over the world come to pass? A little too soon to say. But one thing is certain, It’s probably smart to listen when so many serious and well respected people repeat the same thing so loudly. Fortune, for example, says, “There ought to be a restraining order preventing the word ‘revolutionary’ from getting too close to the word ‘technology’,” since most of the “disrupters” fail to transform society. Yet the article goes on to distinguish blockchain from other technologies that are just “marketing hype,” calling blockchain “a technology that may well change business in scores of industries.”
Still, these predictions of blockchain’s eventual global domination are not the reason the mortgage industry should embrace what this new technology has to offer. The best reason to include blockchain as a practical solution in your 2018 toolkit is that it’s a practical way to improve how your company conducts everyday business, both internally and with customers.
Back to Basics
When it comes to using blockchain in the mortgage ecosystem, many people are confused about what the technology can actually do. Media headlines on flashy topics like Bitcoin often grab the limelight when blockchain is discussed, which can distract for a complete understanding how blockchain can help them make a difference today.
Bitcoin is part of blockchain’s hype. But because Bitcoin is currency-focused, it’s not the blockchain system that works best for the mortgage industry’s biggest challenges—many of which fall under the unsexy heading of “document management” or “data preservation.” These areas might not grab headlines, but they are basic, critical functions of the mortgage ecosystem.
Many of the industry’s current challenges fall in the areas of preservation, verification, and validation of mortgage-related documentation, and how to reduce compliance-related headaches by preserving, verifying, and validating data.
Let’s take a look at how blockchain—specifically the “SmartProvenance” collaborative blockchain solution from Factom Harmony—can help you solve each of these issues:
- The mortgage industry relies on having a paper trail and associated data set of critical documentation at the ready to prove originality. SmartProvenance makes it a no-brainer to preserve digital records for potential future disputes. By establishing provenance through blockchain (which reveals how the document was created, its history, sequence of ownership, storage locations, and integrity), lenders are able to easily preserve the data, files, and documents used in each step of decision-making and processing for a mortgage. The result is having picture-perfect compliance evidence available for future audits.
- Ensuring or verifying a document’s originality and integrity is a related challenge for the industry. With SmartProvenance, any data/documents housed in private data centers and secured by private networks can be both registered and verified for third-party use—and here’s the key—without exposing that sensitive customer data. This level of verification lets the industry ensure the authenticity, accuracy, and immutability of all mortgage-related data.
- SmartProvenance also allows you to validate everything from the original ownership of documents to the correct source and authoritative version of loan paperwork. Again, this is not about buying into blockchain for its bells and whistles or choosing a solution based on hype—it’s about making sure that the basics of the mortgage business that affect customers and credibility are covered. In short, this level of validation provides everyone in the mortgage ecosystem with paper-level proof, minus the need for problematic paper files.
- The mortgage industry used to preserve, ensure, and validate documentation through the management of paper files that moved to virtual files that were nothing more than PDF photocopies of the old paper processes. But paper is not immutable in the same way that pure data—via Factom Harmony’s collaborative blockchain solution—is. The SmartProvenance solution not only cuts down on unnecessary and modifiable paper versions, it also decreases compliance-related challenges, leading to significant cost savings.
As these examples show, it’s more prudent for the mortgage industry to be front-loaded with their document management solution than having to backtrack and play catch up when something goes awry. Factom’s SmartProvenance blockchain solution allows you to create the right infrastructure to track your mortgage documentation, so that you’re well-prepared in the event of future litigation.
Why It Matters Now
With Factom Harmony’s SmartProvenance, preservation, verification, and validation become about more than just making data backups; the bigger picture is about capturing the provenance of the entire paper/digital trail. By using this advance preparation, you’ll not only solve the key problems faced by the mortgage industry in terms of document and data preservation and verification, you’ll also reduce costs associated with audits and due diligence by reducing your risk associated with documents and data issues.
With 2018 right around the corner, it’s becoming increasingly critical to move from “observer” and “investigator” mode to “technology adopter” with blockchain. Keep in mind that the window is closing on the advantages for early adopters to carve out market share for blockchain in lending and securities.
If 2017 was about information-gathering to better understand what blockchain is and does, 2018 is the time to showcase this knowledge by creating the infrastructure to move forward. If this technology moves down the path outlined by all the experts and is creating new and better ways to ensure compliance and provide permanent transparency, at what point does it become a hindrance to your business or your compliance programs to not have a blockchain strategy?