The Mortgage Blockchain

Gaining the ideal-state efficiencies that blockchain technology requires cooperation across a value chain. Almost certainly, it will require significant government collaboration and resources, especially when public records are involved.

Governments are known more for regulation than collaboration, but this is starting to change. At the Chicago Blockchain Summit last week, the State of Illinois blockchain evangelist, Jennifer O’Rourke, noted that the state is both passionate and pragmatic in supporting blockchain opportunities through the Illinois Blockchain Initiative.

“I want to make Illinois the state of blockchain,” she said. “I want Illinois to show the way to support appropriate governance, economic development, and to integrate the technology into government itself.”

The business and technology challenges are immense, as a number of speakers at the summit pointed out. FinTank, a Chicago-based FinTech community and education hub, sponsored the event.

Blockchain is early on in commercialization. The technology is developing and getting easier to deploy, and business use-cases abound. Proofs of concept are rolling out, efficiencies are well established, and costs are still high, especially when the ultimate efficiencies require cooperation across entire business ecosystems.

“This is not a cost play,” said Obreahny O’Brien, blockchain solutions architect for the EY consultancy. “It does not reduce costs in the short term. Costs will probably increase in the short term as underlying business as processes have to change.”

Real estate is a case in point, showing the cooperation and effort involved to realize efficiencies. Ultimately, blockchain can provide the underlying data infrastructure to “get people to the closing table faster, with less risk and fraud,” said Dave Conroy, R&D lab engineer at the National Association of Realtors.

Chicago Blockchain Summit

NAR estimates that the average mortgage takes 45 to 60 days to close. Given the number of parties and duplication of effort that can be eliminated, “the distributed ledger process could revolutionize real estate,” Conroy said.

John Mirkovic, deputy recorder-communications, Cook County Recorder of Deeds, agrees. The two presented at the FinTank blockchain summit real estate session.

Earlier this year, the Cook County Office published the results of a trial to verify whether mortgage deeds could be verified using the public bitcoin blockchain. Although the pilot results were unsatisfactory, blockchain itself shows promise as an underlying technology of a new lands record system, according to the pilot’s final report.

“We are interested in creating the fundamental layer to replace paper-based mortgage data,” Conroy said.

To make it possible for all parties to use that infrastructure, they must all agree on basic data standardization, Mirkovic noted. “What blockchains and distributed ledgers do is let a large number of people to agree on a single set of data.”

To that end, NAR is participating in an effort to create a Uniform Parcel Identifier registry, essentially a Vehicle Identification Number (VIN) for homes.

Agreement on personal identity would be required as well. The W3C, which creates standards for the world wide web, is working on self-sovereign identity. In essence, “self-sovereign identity puts your identity in your control,” said John Callahan, chief technology officer at Veridium, an identification and security firm.

The implications in the wake of so many recent data breaches are self-evident, and I believe all of these technologies will come together eventually. It will take time, money, and collaboration among private and, especially in areas like real estate, public entities. Given the outlook for government finances in the United States and the always-present forces to maintain current revenues from the technology status quo, it will be a long effort requiring considerable leadership.