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Blockchain Takes Disruption to the Real Estate Market with Crowdfunded Mortgages

Blockchain is currently synonymous with disruption – the technology has opened the proverbial Pandora’s box on the need to rethink legacy systems. The disruption that blockchain technology brings is very visible in the financial industry as cryptocurrencies continue to drive conversations about the irresponsible monetary policies underpinning fiat currencies. Wall Street also faced its fair share of disruption with the impressive performance of cryptocurrency assets (as an investment) relative to traditional assets such as stocks.

Blockchain is also changing how business is being conducted at the enterprise level with smart contracts solution on platforms such as Ethereum and NEO. Now, blockchain technology is taking its disruption into the real estate market. ATLANT for instance, is a blockchain platform for facilitating rental property transactions with a tokenization model. LAToken can also serve as a tool for fractional investing in real estate. Now, another entrant is targeting the real estate mortgage industry with a solution that removes banks and traditional financial institutions from the mortgage process.

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What has blockchain got to do with mortgages?

Homelend is building a blockchain-based, peer-to-peer mortgage lending platform that will expand the financing options for homeownership by helping financially excluded but otherwise creditworthy individuals to finance their homes.

The mortgage industry has remained practically immune to change in the last couple of decades – the value chain of paper-based loan origination, servicing, and securitization process often involves lots of back and forth between many parties and stakeholders. The complexity of the mortgage process makes many potential homeowners dread the sheer amount of paperwork that they’ll be required to manage. Getting a mortgage under the current setup feels like walking through a minefield, you are never sure when you’ll make a misstep and have your mortgage denied.

Homelend is a simple but innovative solution to some of the biggest mortgage challenges. Homelend creates a proprietary creditworthiness assessment that goes beyond the traditional credit score to meet the need of a new generation of borrowers. With Homelend, you get to crowdfund your mortgage from a network of investors who trust that your data as stored on the blockchain is accurate and won’t make you run through an obstacle course to prove your creditworthiness.

The lenders in turn get to put their money in an investment that pays a predictable return without worrying about the volatility of traditional mortgage-backed securities. In fact, the return that lenders can expect on their loans can be potentially higher than the returns from other comparable traditional real estate investments.

Homelend also protects both borrowers and lenders with Smart Contracts, which hardcode the terms of the deal. For instance, borrowers only get to apply for a loan after they’ve satisfied creditworthiness requirements – Homelend won’t be the place to get or extend subprime mortgage loans. When you apply for a loan on Homelend, you can only expect the loan to be approved the pooled funds from the lenders reach the cap that is needed to purchase your home – you won’t get any money if the loans doesn’t reach the cap.

If the loan reaches the cap, the property you purchase will be held as collateral until you repay the lenders. If you don’t repay the loan, Homelend will forfeit the property and use the funds to return the moneys that the lenders put down.

Since borrowers, lenders, realtors, and other stakeholders are all on the Homelend platform, getting a loan will be faster because you don’t have to worry about chasing and mediating all the parties in the mortgage process.

Finally, a mortgage solution that works for millennials

Recent real estate market data suggests that millennials are becoming more interested in buying homes. However, the number of millennials buying homes is less than impressive relative to the data. The main reason millennials are not buying homes is that they can’t afford to buy a house. Many millennials are being bogged down by huge amounts of student debts. The Federal Reserve observes that the outstanding student loans is hovering around $1.44 trillion.

Homelend is riding on the disruptive power of blockchain technology to create a peer-to-peer mortgage funding solution that works for millennials. The blockchain can contain immutable records of the creditworthiness of potential borrowers; hence, millennials will find it much easier to obtain mortgages without needing to provide pay stubs, employment records, and bank statements since all the data is available in digital form on the blockchain.

Homelend recognizes that the current mortgage system is unwittingly rigged against millennials and other younger demographics. The metric that the mortgage industry uses to measure creditworthiness are outdated.  In the words of Cohen CEO and Co-founder of Homelend, “our target from the beginning was to focus on our generation need. This way our product is designed to enable people to help other people (P2P) achieve the most basic financial goal for a young couple, which is to be able to own a home. We wanted to create a mission-driven business because we felt we are living in a period which create housing crises for the young generation.”