Recent implementations at the end of the mortgage loan process show possible applications for future development
March 28, 2022 – GREENWOOD VILLAGE, Colo., – As the mortgage industry enters a down cycle, blockchain technology is emerging as a viable tool for lenders struggling with high origination costs, shrinking margins, complex processes and slow investor delivery, according to mortgage advisory firm STRATMOR Group.
In this month’s Insights Report article, “Mortgage Technology: The Road to Blockchain,” coauthors Lisa Springer and Brett McCracken break down recent blockchain developments and analyze some of the impacts this innovative technology could have on the mortgage industry. Springer is STRATMOR Group’s senior partner and CEO and McCracken is a senior advisor.
In the report, Springer and McCracken compare blockchain to pre-pandemic eClosing technology. Before the COVID pandemic hit, eClosings were a notion that lenders understood, but few believed it offered tangible ROI. As the pandemic took hold and lenders scrambled to provide remote closing capabilities, priorities changed and eClosings became a necessity.
While blockchain technology is just beyond the cutting edge for most lenders, so too were eClosings just a couple of years ago. The authors see a similar path forward for blockchain technology.
“The core value blockchain technology offers is a secure, transparent, publicly distributed, decentralized digital ledger,” says Springer. “It represents a series of blocks, digitally encrypted and chained together for security, that store details of all transactions added to the chain which are authenticated. These transactions are verified by the platform’s validators, who approve them using their computational power through computer system nodes.”
With blockchain, “market participants can replace trust with truth as counterparties to a transaction — a transaction in which information is immutable,” Springer says. “This concept of ‘trust’ versus ‘truth’ has potentially deep cost savings implications that haven’t yet been quantified.”
McCracken points out that for all it offers, blockchain is just one component of a more comprehensive technology stack. The new tool would not displace the lender’s existing POS, LOS or other systems. But it could change the way they are used in the future. “It stands to reason that over time, the core platforms lenders use will find innovative ways to bring more aspects of blockchain technology and principles towards the front of the process,” he says.
In the report, the authors point to concrete examples of how blockchain is already being used in the industry to good effect. While they point the way, it is not yet clear how these approaches will be embraced by the industry at large.
“It’s difficult to say with any conviction where the industry is headed next in terms of blockchain evolution and adoption,” says Springer. “Given the challenges of today’s market, STRATMOR still sees many lenders focused on preservation instead of innovation, which is completely understandable. Most lenders have not seriously considered blockchain’s application to their business.”
STRATMOR believes it will take a handful of innovative lenders to demonstrate, at scale, this iterative process. “Once small and mid-sized originators, who often don’t have the capital or resources to experiment, see tangible results, it greatly increases the probability loans onboarded to the blockchain will have the significant support the industry needs to adopt this new technology option,” says Springer.
Find the entire article in this month’s Insights Report.
With storm clouds approaching the mortgage market, many mortgage lenders are wondering where to invest resources to maximize sales. STRATMOR Group’s Customer Experience Director Mike Seminari provides a path lenders can follow in a down market to maximize sales and marketing reach in his article, “Keep Singin’ in the Down-Market Rain: Invest in CX” in the March 2022 edition of STRATMOR’s Insights Report.
About STRATMOR Group
STRATMOR Group is a leading mortgage industry advisory firm that provides a range of programs and services designed to counsel lender CEOs and senior executives. STRATMOR serves more than 250 companies annually, providing strategies that increase growth and improve profitability in sales, marketing, technology, operations and mergers and acquisitions. The company leverages comprehensive, propriety data and key insights gained through extensive experience in the mortgage industry. STRATMOR is well known for its financial models and its collaboration with the Mortgage Bankers Association in the PGR: MBA and STRATMOR Peer Group Roundtables Program. Find out more about STRATMOR on its website at www.stratmorgroup.com.