Today Figure Lending announced that it transacted with asset manager Apollo to originate and transfer a mortgage using blockchain technology. Most residential mortgages in the United States use the MERS mortgage registry system to log the current ownership of a mortgage. Figure used its Digital Asset Registration Technologies (DART) solution instead of MERS.
Figure has originated plenty of mortgages on the Provenance blockchain in the past, and it has also packaged them as asset backed securities. What’s different in today’s news is creating a mortgage as an eNote – a kind of promissory note – which makes it easier to transfer using DART. And the eNote is a non-fungible token or digital asset.
In the U.S. mortgage sector, many new residential mortgages are registered at public registries with MERS as the original mortgagee, acting as nominee for the true lender. That enables faster transfer of title by updating the centralized MERS database. When the mortgage is sold, the lender gets updated on the MERS database with no need to update the public records. MERSCORP is owned by ICE which also owns the New York Stock Exchange.
So how can DART improve on the MERS experience? It can reduce transaction settlement times which in turn reduces risk. If a blockchain-based mortgage is sold through the integrated blockchain marketplace, then DART can monitor these transactions and (we assume) automatically update the registry. Additionally, Figure now has tokenized bank money – the USDF ‘stablecoin’ – on its Provenance blockchain, which enables faster settlement of digital asset transactions.
“Blockchain can provide enhanced protections and transparency in the ownership process for consumers and real-time settlement for investors, replacing trust with truth to create a faster, more efficient process for everyone,” said Daniel Wallace, GM of Figure Lending. “This important development demonstrates just one way that blockchains will provide significant improvements that streamline the mortgage lending space.”
Last year Figure partnered with Apollo to use blockchain for fund trading.
But Figure is not the only blockchain organization eyeing the mortgage sector. Blockchain startup Symbiont has partnered with mortgage sector veteran Lewis Ranieri and developed a blockchain solution. It not only manages the loan origination but the entire workflow of servicing the mortgages. In the United States, most banks outsource mortgage servicing – the payments by the borrower – so that’s a significant industry in its own right. By having up-to-date servicing data for a mortgage-backed security, you could have a pretty accurate idea of its value.
Elsewhere, Dubai has also developed a blockchain-based mortgage registry. In the UK, Coadjute deals with the administration of mortgage sales between buyers, sellers, their lawyers, real estate agents, and banks.