The housing and finance industries have invested billions in data and IT infrastructure. Despite that investment, the industry remains highly fragmented, lacks shared standards, and depends on siloed or inefficient partnerships. While the industry once focused on data and IT infrastructure within an organization, now organizations need to put the same type of systems and workflows in place to work across business networks.
Without access to the right data in real-time, innovation and its impact are inhibited.
Currently, the data the industry relies on and shares amongst partners is siloed and processed slowly, linearly, even manually. The rigid nature of current systems (and the learned helplessness of expecting status quo) holds back data sharing processes and workflows. These constraints make data difficult to share, yes. But they also inhibit visibility to all parties and make data difficult to change — especially if the change needs to be consistent across parties.
As a result, mortgages are processed slowly, and it’s still hard to ensure compliance and manage risk. It’s difficult to incorporate and share new data sources that inform mortgage servicing, too. Think of rent history, for example, that can help create a more fair and equitable housing finance system.
There is a big opportunity to remake the housing finance system, and it all starts with easy and secure exchange of data across multiple parties through the formation of data alliances underpinned by business blockchain technology. If the industry considers the network as a whole and comes together around a shared source of truth that everyone trusts and relies on, financial institutions can operate in a data alliance where data is exchanged securely and with control.
What’s one of the key limiting reagents in achieving high efficiency in the end-to-end mortgage lifecycle? Speed: The speed at which data can be seamlessly transferred and verified between parties.
The current data ecosystem is extremely expansive with tens of thousands of participants across both the primary and secondary market ecosystems. Participants manage their data across a multitude of software as a service (SaaS) and homegrown, DIY applications built on their preferred cloud service provider or on premise.
From origination and underwriting through closing, GSE acquisition, securitization, and administration, the volume of data (and metadata) that accumulates and compounds over the end-to-end lifecycle of a loan is overwhelming. Furthermore, this information travels in a linear fashion with many hand-offs between organizations. The older the data, the less it can be trusted and the greater the risk of errors.
In many cases, an organization may acquire then transfer then reacquire the same loan data several times over the course of the life of a loan.
- A major seller/servicer originates a loan, but immediately transfers servicing rights to another party, then reacquires servicing rights
- Once this loan is packaged into a mortgage backed security, the investment arm of the same seller/servicer may invest in the broader security the loan lives within, further necessitating access to the underlying data and loan history
- All of this data is acquired and validated, sent, reacquired and revalidated, resent and then reacquired by the same party over the course of the life of the loan.
Meanwhile, the customer or borrowers are tasked with duplicative, manual requests during the application process like providing physical or digital documentation to originators even though, with a bit of innovation, this information could be shared programmatically with the borrower’s consent. The borrower’s experience is further complicated should they be evaluating rates across several originators concurrently, requiring that they respond to similar but slightly different data requests across different platforms.
The way the financial services and mortgage services in the industry collaborate around data sharing is inefficient, point to point, and surprisingly manual. Many of the costs associated with onboarding, audit, reconciliation, transfer, re-onboarding, etc. are superfluous and ripe for fintech disruption. And this disruption all “lends” itself to benefitting both lenders and homeowners with a streamlined experience that reduces the costs once associated with the end-to-end process.
For years, many have held that the promise of blockchain will solve all data sharing challenges. But public blockchains fall woefully short of this promise. While blockchain has undergone a notable hype cycle, when it comes to enterprise experimentation, public blockchain pilots have been one of the most failed technology pilots. In particular, the solutions have fallen short in dealing with sensitive and regulated loan data in the complex and highly transactional multi-party ecosystem that is housing finance.
At Vendia, we have built a business blockchain which addresses traditional blockchain shortfalls and excels beyond other solutions. Our platform, Vendia Share, delivers an enterprise-grade, private, permissioned, business blockchain suited for the housing finance ecosystem. Our platform combines the decentralization and trust of blockchains with the scale of public clouds, all wrapped in the compliance and security features required by the industry. Furthermore, Vendia was engineered for rapid adoption irrespective of an organization’s technical maturity:
- It takes ~15 minutes to spin-up a blockchain ecosystem that leverages the full scalability and security of your cloud of choice
- A “golden loan record” can be created during origination and updated and shared with all relevant parties over the course of the life of that loan
- This record can contain both scalar data and files – all bundled together on an immutable ledger
- Role-based access control features facilitate collaboration and sharing all (or just parts) of that golden loan record’s data and files with other parties in the ecosystem quickly and easily with the auditability of an immutable ledger
- Eliminate the need for duplicative requests and reconciliation of stale data — all parties see the updated data that they need, when they need it, and only that data.
In summary, Vendia Share eliminates the inefficiency of manual loan data reconciliations, expedites the end to end process from origination to bond administration, and provides unprecedented transparency, as appropriate, to housing finance actors and regulators.
Sometimes data sharing partners in a data ecosystem will withhold data out of ownership and control or access concerns, but this brings compliance risk and other liabilities.
By connecting industry players and their data through a business blockchain, the data is always up to date. Everyone enjoys a real-time view of the aggregate data, which helps ensure actions and results are compliant. The lineage created between every transaction allows for easier auditability, and the tamperproof nature of blockchain ensures the data can be trusted and verified. There’s even an opportunity to implement additional checks and balances through the use of rule-based smart contracts that can prevent or flag transactions or data that is outside the bounds of what is expected.
Ensuring immutable audit and regulatory oversight is straightforward with Vendia. Any auditor or regulator can simply provision a node on the network and, with participant approval, be granted full read access to all of the data in the network. For example, let’s look at a scenario where the Consumer Financial Protection Bureau (CFPB) would like to monitor servicing activities and servicing transfers: While servicers on the network may only have access to read/write loan data within their portfolios or specific loans shared with them by another servicer as part of a servicing rights transfer, CFPB could have read access across all servicer nodes, but just to the data they need for regulatory purposes (including the full history and lineage of all transactions associated with that data).
The rigid nature of existing housing finance systems makes it difficult to change the way decisions are made and processes are worked because of the historical dependence on past technology implementations. Going forward, a more holistic and flexible system that easily combines varied and new data sources into the process opens up new innovations and opportunities now and in the future.
Blockchain technology is maturing to the state where it is an excellent candidate for rethinking the mortgage and credit system. Private blockchains built for business, or what we call business blockchains, take into account the needs of enterprises, especially the need for speed and automation, plus:
- Independence from public blockchain consortiums that must agree on systemwide updates
- New partners can easily be included into the network
- Data models and schemas can easily be updated to reflect new data sources or approaches
- Smart contract implementation
- Allowances for any partner to audit data, including data back in time.
Vendia removes the historical obstacles, redundancies, and headaches in mortgage servicing by ensuring data in your ecosystem is shared in real time, across business networks, and accessible to data alliance partners. Meanwhile, data owners can easily exercise fine-grained control of their data at all times — right down to the individual data field or file.
See how much you can achieve in one week with Vendia Share. Invite us to automate and accelerate data workflows and processes with a one-week proof of concept, or reach out to our team to explore your questions and poke at what’s possible.