What is a blockchain? Perhaps we have heard about this term in relation to bitcoin or cryptocurrency and we might be thinking that it is the only use for such a technology. The fact is this is not a technology solely for that purpose because blockchain is a whole new concept that promotes a whole new level of security and transparency. Could this technology benefit the mortgage industry?
Remember how records are sorted out in government offices in the usual way and then try to remember your lesson in computer programming on how records and files are sorted. In a way, this is “Blockchain” – a continuously growing list of records, called blocks, which are linked and secured using cryptography.
Satoshi Nakamoto the inventor of Blockchain in 20018 originally envisioned it to be used for use in the cryptocurrency bitcoin. It will be used as a public transaction ledger. Utilization of the technology throughout the year increases because of its security by design and is an example of a distributed computing system with high Byzantine fault tolerance.
Let us further define how the security process works:
Each block typically contains a cryptographic hash of the previous block, a timestamp and transaction data. By design, a blockchain is inherently resistant to modification of the data. It record transactions between two parties efficiently and in a verifiable and permanent way. Peer-to-peer network collectively manages the blockchain ledger collectively adhering to a protocol for validating new blocks. Once recorded, the system prohibits retroactive alteration of data in any given block without the alteration of all subsequent blocks, which requires collusion of the network majority.
Blockchain use in the mortgage industry
So how can Blockchain be beneficial to the mortgage industry? Since Blockchains provide improved safety and security, it is highly beneficial in storing data on a loan. This can be done by storing that data on a loan origination or servicing platform which is tagged to a highly secure shared data framework where the records are represented by unique metadata that is algorithmically defined. 64 calculated characters called a “hash” represents the loan balance information. The hash contains not just the loan balance but other data, such as its source.
Here are other benefits of Blockchain in the mortgage industry:
- Reduce data security risks by improving the data encryption used to trade information.
- Address compliance concerns.
- Streamlines transfer of portfolios.
- Shrinks risk by increasing the clarity of the loans comprising the portfolio.
- Transparent and fast approval of loans without sacrificing security and privacy.
- Mortgage servicers can more easily leverage portfolio sales and acquisition to achieve growth and product profitability.
- They can also improve demographic, as well as geographic, footprint goals.
Are you ready to adopt Blockchain?
So, what do you think about Blockchain and using it in the mortgage industry? Would it result in a better and more successful industry or will it just complicate things further? For a detailed discussion about this topic and its application in the mortgage industry please visit our source here.
Thanks for reading.