Shelter is traditionally recognized as one of the basic essentials of life among food and clothing. As a matter of fact, shelter creates a microclimate that is essential for survival. The microclimate created by shelter protects individuals from the effects of both natural elements and general security as a whole.
With the level of importance that is attached to shelter, owning a home incidentally has become an organised procedure that is critical to the social existence of mankind. Almost every government and organized social ecosystems have made provisions for citizens within a given geographical space to acquire homes and places of shelter. However, the processes involved in traditional home acquisition are becoming more and more complicated. This is probably due to the rising demand and limited space availability
Traditional mortgage processes
A fundamental aspect of these systems of home acquisition involves funding in the form of mortgages. By definition, mortgage is a legal agreement by which a bank, building society, etc. lends money at interest in exchange for taking title of the debtor’s property, with the condition that the conveyance of title becomes void upon the payment of the debt. This may seem a straightforward process, but the actual implementation processes are usually very much complex.
Traditional mortgage loans involve a lot of paperwork, overhead costs and inefficiencies. The number of documents that need to be gathered and processed only for an application is usually bulky. Creating a new mortgage requires a significant amount of time for both the borrower and the lender. The traditional process is still paper-based, in contrast to other financial areas that have already shifted to the digital space. In addition, the mortgage loan process continues to involve many parties, including the buyer, seller, financial institution, rating agency, appraiser, broker and so on, making it even more complex.
However, the industrial revolution that is heralded by blockchain technology is opening up more convenient and effective ways of simplifying data related processes, and the housing and mortgage industry is not being left out.
According to the CEO of Homeland, Itai Cohen, despite the enormous size of the mortgage industry, it is still highly regulated, dull, archaic, requires lot of capital and has been untouched by innovation for many years. Hence, a fundamentally different approach to the mortgage industry had to be taken using recent technologies. Cohen explains that such approach would be obviously entirely digital, instantaneous and free of any paperwork, faxes or anything like that. This new approach must be innovative, and appealing for millennials, the opposite approach than the one that the mortgage sector has today.
The blockchain, being a distributed ledger can significantly simplify the transfer of and access to information for each of the parties involved in the mortgage value chain. Also, with its unique capability to generate trust, transparency, and record immutability, it is an effective move towards digitization, not only of mortgage documentation but of all related business processes.
Therefore, by adopting blockchain technology, the mortgage industry will be exposed to new P2P funding/investment opportunities, better managing information, and automating business processes with the help of smart contracts.
A simplified industrial process
Incidentally, borrowers can crowdfund their mortgage loans without relying on any bank and their associated complicated procedures. Lenders as well can easily access and obtain firsthand and authentic information about any project into which they may wish to invest. This implies that the process of getting a loan will be much faster and will be in an ‘all in one’ model on a single platform. This eliminates the multiple procedures that most often involves several different platforms, thereby increasing the chances of error and trust requirement.
Hence the model that is proposed by Homeland, which involves the development of a decentralized, peer-to-peer mortgage lending platform is expected to serve two major purposes. First is to modernize the age-old mortgage lending system in order to make it efficient, cost-effective and customer-centric. Then secondly to expand home ownership opportunities for a new generation of borrowers, meeting their distinct lifestyle and needs.
Therefore, by implementing blockchain technology, the sophistication and complexity involved is delivering a most essential necessity to humankind is becoming resolved and simplified. Hence, like in most industries, value achievement and cost effectiveness are taking center stage and solutions are extended to those who really need them.