Blockchain and Ownership: This Makes Sense in Mortgages

A reader emailed me this story, Figure and Apollo Execute Mortgage Transactions Using Blockchain Technology to Transfer Ownership:

Figure has begun originating eNote mortgages that are on-boarded as unique digital assets on the Provenance Blockchain. At the same time, they are auto-registered with Digital Asset Registration Technologies, Inc. (DART), a combined lien and eNote registry system developed by Figure Technologies, Inc. and used in place of the “MERS” databases. DART monitors blockchain-based asset transfers and offers a streamlined and more efficient alternative to the existing loan tracking database systems and the often delayed, weeks-long settlement process for paper promissory notes.

In the transactions, Apollo, through investment vehicles it manages, purchased these digital assets via an integrated, blockchain-based marketplace that, when coupled with use of a connected digital currency account such as USDF, enables real-time, multi-party settlement with less risk.

The friction, risks, and costs involved in the traditional loan sale and delivery process can all be reduced using the DART and Provenance Blockchain systems, which allow for immediate and automated asset onboarding, real-time settlement of loan pledges and sales, and use of an integrated registration system that can automatically reflect transfers of loan interests. The process has traditionally required duplicative registration of a loan in multiple “MERS” databases and slow and risky trilateral settlement arrangements with originators, warehouse banks, and investors.

This makes so much sense. There are things about this that hardcore decentralization nerds (like me) won’t love, like the Provenance blockchain, and USDF, which is basically a USD stablecoin created by banks. But fundamentally, mortgage is a digital asset and it makes sense to do registration and transfers of ownership via blockchain.

Note that what is being transferred is the loan, not the underlying real property. That latter piece is what companies like Propy and others are working on but I’ve long held that because real property ownership is controlled by government, we need legislative reforms (or at the very least, judicial recognition of title on the blockchain) before we see real advances on that front.

But mortgage paper is fundamentally digital. It’s a promise to repay, secured by a lien. Those mortgages are bought and sold in the financial markets. It makes sense to put that on the blockchain.

Now, I hope we see a truly DeFi version of this that isn’t controlled by a small group of financial institutions. We shall see.

-rsh

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Rob Hahn

Rob Hahn

Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called "a revolutionary in a really nice suit", people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.

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