Does Blockchain Live Up to the Hype?
Does Blockchain Live Up to the Hype?
Moody’s recently captured headlines (and the imagination of mortgage operations officers) when it said blockchain could save the mortgage industry as much as $1.7 billion a year. Moody’s suggested mortgage lenders could leverage blockchain to “streamline key mortgage processes, eliminate redundancies and reduce costs.” But does the promise of blockchain really hold up?
“While large banks have already adopted and implemented blockchain’s distributed ledger technology, mortgage lenders have been slow to get on board,” said Justin Burch, Managing Director at The Collingwood Group. “This isn’t a big surprise as the mortgage industry is historically sluggish in embracing new technology.” Investors, such as Raniere Solutions, and blockchain crowdfunding startups, like Homelend and Viva Network, are working to bring blockchain-enabled lending to mortgage consumers, but independent mortgage lenders still rely heavily on the traditional mortgage process.
If widely adopted by lenders and other parties to the real estate transaction, blockchain could deliver enhanced data integrity and improve the loan process. Blockchain offers decentralized, and therefore more secure, data storage. Storing all loan information on the same platform in the same format would supplement control protocols for data integrity issues and limit or possibly reduce documentation errors. The public nature of the blockchain ledger could enhance transparency and curb fraud. Blockchain could address the problem of disintermediation in the mortgage process, by removing some of the intermediaries, thus reducing operational costs.
“Blockchain certainly offers benefits for mortgage lenders, especially in its ability to streamline data management and the loan process, but it’s hardly a silver bullet,” said Burch. The success of the technology and realization of cost savings depends on wide-scale adoption, and “there are some major barriers for the mortgage industry.” Understandably, due to its relative newness, many in the mortgage industry lack the technical knowledge to understand blockchain’s applicability, and the nonbank mortgage lenders that account for the majority of originations today generally have limited resources to build out their own blockchain platform.
Americans Know Housing is a Seller’s Market, but Buyers Still Want In
Is this a good time to buy a house?
Economic conditions like a strong job market say “yes.” Housing market fundamentals like too few homes available for sale say “no.” Personal views about owning versus renting say “maybe.”
In Gallup’s most recent survey, far more Americans said yes than no, although the 65% response rate was down from 67% last year, and down even more from 74% in 2014, when the housing recovery was kicking into high gear.
Gallup first asked the question in 1978, and the survey firm notes that the percentage of Americans saying it’s a good time to buy has never fallen below 50%.
Read more: Marketwatch
Freddie Mac Is Quietly Helping Out the U.S.’s New Mortgage Kings
Freddie Mac has quietly started extending credit to nonbanks that issue mortgages, a move it says will help the companies maintain access to a crucial stockpile of cash if their home loans go sour.
But critics say the financing could create an unfair market advantage that allows preferred lenders to muscle out competitors.
The new Freddie credit lines, which haven’t been publicly announced, are meant to support nonbanks’ mortgage-servicing operations. That’s the lucrative business of managing a home loan after it’s been issued.
Although banks dominated mortgage lending immediately after the 2008 financial crisis, now they are facing stiff competition from companies such as Quicken Loans, Freedom Mortgage, LoanDepot and Caliber Home Loans. Nonbanks issued nearly half of mortgages sold to Fannie Mae and Freddie in 2016, compared with 8 percent a decade ago.
Read more: Bloomberg
From CRA to Fintech, New FDIC Leadership Faces Tough Choices
The new Trump-appointed bank regulators have begun moving forward on a swath of changes to bank regulations — all except one: the Federal Deposit Insurance Corp.
While the Office of the Comptroller of the Currency has announced plans to ease restrictions on small-dollar lending, begin dialing back the Volcker Rule and is expected to seek comments on the best ways to revamp how regulators implement the Community Reinvestment Act, the FDIC has stayed out of the fray as it seemingly awaits Senate confirmation of Jelena McWilliams as its chairman.
“The day-to-day business is still going on at the FDIC but any long term and new policy initiative will not proceed until the new chairman arrives,” said V. Gerard Comizio, a partner in the corporate department and chair of the banking practice at Fried Frank’s Washington office.
Read more: American Banker
A Shrinking US Middle Class is Transforming the Housing Market
The divide between the rich and the poor has been widening over the past three decades. And this growing chasm is being mirrored in homeownership trends in the U.S.
John Burns Real Estate Consulting examined the state of the housing market for middle-class Americans (excluding those over the age of 65). The firm found that a shrinking middle class has led to higher demand for rentals, high-end and low-end homes, therefore less demand for median-priced homes.
Middle class is defined as those who earn between two-thirds and twice the median U.S. household income. Fifty-seven percent of American households were middle-income in 1970, compared to 45% today, representing a 12 percentage point decline. Meanwhile, there’s been a seven percentage point increase in households that make more than double the U.S. median income (12% in 1970 to 19% in 2016) and a four percentage point increase in households who make less than 80% of the U.S. median income (31% in 1970 to 35% in 2016), according to John Burns’ analysis.
Read more: Yahoo Finance
ICBA: House Should ‘Immediately Pass’ Senate Reg Relief Version
The Independent Community Bankers of America called on the House Monday to “immediately pass” the Senate’s bipartisan regulatory relief package rather than delay reforms with further debate and legislative maneuvering.
The group made its plea in a petition signed by over 10,000 community bank employees. The Senate passed its bill (The Economic Growth, Regulatory Relief, and Consumer Protection Act, S.2115), sponsored by Banking Committee Chairman Mike Crapo, R-Idaho, in March after extensive negotiations between Republicans and supportive Democrats produced a moderate relief package that can pass both chambers.
“We, the undersigned community bankers, directors, employees and customers from across the nation, respectfully urge the U.S. House of Representatives to immediately pass legislation to provide community banks with regulatory relief,” the petition said.
Read more: American Banker