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The Digital Revolution – Blockchain

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There has been a lot of talk over the past year about the implications of blockchain technology in the mortgage and title sectors. And phrases from, “Greatest thing since sliced bread,” to, “It’s going to take our jobs! Kill it! Kill it with fire!” have been uttered about it. But the truth lies somewhere in the middle. Here is a brief writeup about what blockchain is and what it will do/won’t do.

What is Blockchain?

At its core, blockchain is a distributed ledger technology that stores digital information that can never be directly edited. If an edit needs to be made, or new information needs to be added, additional documentation can be attached. This technology has the potential to be very powerful in the title and mortgage fields, which involve many data gathering steps and multiple pieces of documentation that can go back decades.

Blockchain works via hashes, which is the same technology e-signatures use. Hashes are 256 character algorithms developed by the NSA over 2 decades ago, so it is not new technology. How it’s being applied makes it new in the title and mortgage space.

Now, knowing what blockchain is, what can it do and what won’t it do?

The Do’s

One of the major advantages blockchain technology provides is it will eliminate all 2nd checking in the mortgage and title processes. As stated above, once the document is correct, it can never be edited, only added to. Blockchain has the potential to further strengthen compliance and audit by demonstrating security of any digital asset to anyone that has permission on the network. Another function blockchain provides is the elimination of paper documentation. Since it’s all digital and decentralized, only the people with the proper credentials can access the documents and make additions to stack or chain of documents.

So, for example, we’ve all been in situations where a mortgage is going through an audit. It can take months to comb through a mortgage that is more than a decade old. Making sure every I is dotted (lowercase of course), every T is crossed, to prove without a shadow of a doubt that the documentation is accurate on your end. And, since paper is irrefutable compared to digital documentation, it sometimes involves a very labor intensive process, searching through manila folders for everything. Now, with blockchain, it’s all at your fingertips, online, unhackable, showing a proverbial papertrail of who has updated what. It takes days instead of months to prove you are right in an audit. It provides permanence and accessibility in real time.

With this technology, auditors and auditees will have less work to do on this front.

The Dont’s

One of the major issues with blockchain is the fear that it will take all of our jobs away. This is simply not true (unless you’re a government auditor stated above). While much of the information will be available online and un-editable, there will still be a need for people to type in all of that information and make updates to the documentation.

What this process gets rid of is extra checking once the documentation is proven right.

While the decentralized nature of the digital documentation means it cannot be hacked or edited, proper protocols are required to make sure sensitive data, such as social security numbers, are not released to the general public. With this in mind, cyber security experts will still have an important role to play. They will need to figure out how blockchain and current technology will work together in protecting sensitive data.