Is there a blockchain in mortgage servicing's future?
Servicers continue to face data management challenges, particularly during loan onboarding and transfers. Blockchain technology may hold the key to resolving those issues.
With blockchain's ability to streamline data distribution procedures, the technology could help make servicing processes more seamless.
"What if in the future, all originated loans automatically end up on a blockchain? Payments, taxes, insurance, electronic transfers — with no involvement of people?" Sapient Global Markets Director Brian Martin asked while addressing the Mortgage Bankers Association's Servicing Conference in Dallas earlier this month.
"At this point it is entirely conceivable that the entire servicing industry could be replaced by a blockchain," Martin said.
As technology trends toward intelligent automation, rules and descriptive analytics can be used to guide processes like foreclosures along without the need for repetitive human intervention. In other words, if servicing tasks can be distilled to purely operational over functional, then technology can replace many of the manual tasks that are costly and can ensnarl servicers in regulatory compliance issues.
What makes blockchain technology so promising for servicers is the way it facilitates efficient data management.
"The problem is not transporting the data by itself, the security or the privacy of that data, the integrity — it's none of those things by themselves — it's when you put all of those together, in this perfect storm of emerging technology that we have that increases the value," explained Martin.
"We've got servicers, GSEs, originators, all trying to engage in what is practically sharing data, transportation of data, reporting regulatory laws — you have to have a secure movement, and in servicing you have this natural fit," he added.
Blockchains can support the sharing of common data by avoiding data re-entry and solving for data inconsistency problems during servicing transfers.
When regulatory rules change, blockchains can more efficiently adjust to new rules as opposed to them being interpreted by a number of different firms. The technology will also ensure the exchange of data is cooperative and secure, further supporting data integrity.
Embedding servicing rules into intelligent automation and robotics technology could completely disrupt servicing, but not much has been done to utilize the tools already in existence.
"People are lazy," Martin said, offering an explanation as to why blockchain's potential hasn't yet been taken advantage of. But the good news is that blockchain technology is in a stage with fundamentals already in place, rather than being highly experimental.
The first theory of blockchains actually emerged in 1991, but it took 17 years for anything to come from it, with the first generation of blockchain born in 2008.
And if it took this long for blockchain to grow legs, it could take a considerable amount of time until it has an effect on mortgage servicing, an industry that's been historically behind in the tech space.