The latest fintech buzz has been about blockchain. You've probably heard of it, but what is it exactly?
Simply defined, a blockchain is a distributed and continually growing public ledger of transaction records arranged in cryptographically secured blocks (hence the name) that link themselves together. Each block references and recognizes the previous block by a hashing function, forming an unbroken chain that can’t be altered.
This means that once a transaction is recorded in the ledger, it can’t be updated or changed and it’s permanently linked to the previous block. Anyone with access to the ledger can see the same transaction history as other users.
The latest blockchain offering in the mortgage industry is from blockchain-as-a-service company Factom, based in Austin, Texas. Factom’s product Harmony is a practical blockchain solution. Harmony works with existing document management solutions to create an unalterable record for loan documents.
Factom CEO and co-founder Peter Kirby explained that the system of checking and then checking those who check has caused an increase in the cost of making a mortgage. The benefit of a ledger system using blockchain is that it keeps everything finalized and follows a chain, allowing for lower mortgage production costs and cleaner record keeping, an important facet for the industry following the financial crisis.
“We have a system where every piece of paper is touched constantly and checked and then the checkers get checked. It tripled the cost of mortgage,” he said. “We’ve got a way to say, ‘This is final, final, final.’”
“It’s really useful to know you have exactly the right thing and that vastly improves the cost of keeping a mortgage on the books,” Kirby said. “Blockchain lets us know it’s correct and it’s not going to change.”