Transcription:
Announcer (
Hi everyone, and, thank you for coming to this panel. Very excited to hear about what a blockchain based mortgage is. But the panel is blockchain based mortgages. What are the benefits for lenders? we have our moderator, one of my favorite reporters, Andrew Martinez from National Mortgage News. We have, Candice Dry from Figure Lending Director of Post-Close. We have Leah Price, who's a vice president at Digital Asset Registration Technologies. And we have Valerie Wagner, who's a senior director for blockchain adoption at Provenance. so please enjoy this panel. Thank you.
Andrew Martinez (
Hi everyone. Thanks for coming in. Appreciate you guys coming in to, talk about blockchain. it's a really interesting subject. I have three awesome experts here to talk about it. And really just wanna start off by, with some introductions, just go down the line here. If you guys wanna just talk about, yourself, your role, what your company does.
Candace Dry (
Okay, Hi Canice Dry. I got my start in mortgage in the servicing realm in foreclosure. Slowly moved over onto the post closed side with loan originations and, found myself at Figure Lending where, figure is an originator. Originally it was of both mortgages and helos. Now we're focusing on the heloc space, and we're using blockchain technology to transact those loans.
Leah Price (
Leah Price, I'm a vice president at Dart Digital Asset Registration Technologies, and it is a lean and enot registry. Before that, I was at Fannie Mae, which I understand from the last panel is one of the biggest fintechs in the mortgage industry. And I worked on the day uncertainty program, the desktop appraisal program, and started a center of Excellence for sales engineering.
Valarie Wagner (
I'm Valerie Wagner. I'm director of onboarding and blockchain adoption at the Providence Blockchain Foundation. Previously, I was director of engineering at Figure responsible for putting those mortgages and helocs on the blockchain. And I'm just gonna take a quick minute to explain what provenance blockchain is, since most people probably haven't heard of it. We are the leading public blockchain for institutional and regulated finance. And so through that platform, we deliver material business value to our users through cost efficiencies, through the disruption of inter intermediation, and most powerfully through the instantaneous bilateral settlement between two or more counterparties. We think of it as building a new factory of finance where institutions and investors have the agency to control their own assets, whether it's mortgages or shares in a company stock table or fund through the asset life cycle. And our focus is on performing all actions of that life cycle on the blockchain. So, issuance, managing, financing, trading, securitization, public providence, Blockchain is a public open source proof of stake blockchain and ecosystem with a focus on really building a diverse set of users and use cases to build a financial system that is thoughtful, sustainable, and inclusive.
Andrew Martinez (
Awesome. Thanks for the explanation. And, really just wanna dive into the process. How does a mortgage loan really just get originated? I know it might be a big question, but I guess maybe from beginning to end here, just really curious how it goes and kind of start with you.
Candace Dry (
So, in all honesty, mortgage loan gets originated the exact same way that it does on any other, LOS system. You're still gonna go through your processing and underwriting, and closing. And then once that closing and funding, well, maybe not the funding, the closing takes place, you're gonna be pushing all that information up onto the blockchain where it's hashed, and Valerie can speak more to that, and the transaction of, sending the funds to the borrower are conducted using, the blockchain as well within figure. So Valerie, I'll let you take it from there.
Valarie Wagner (
Sure, So once a loan is originated and it comes to provenance, we establish a record on the blockchain for that asset. And that is a distinct individual asset. The term that you've probably heard in the news is non fungible, non fungible token. And in the headlines you're gonna see board apes and crypto punks. But in reality, a non fungible token is any unique digital assets. And we don't do pictures on problems, we do financial assets, but that record includes the owner, the history of transactions against that asset. We concurrently have a method of, preserving the data that was originated with that loan, not on the blockchain, off the blockchain and encrypted, but using the blockchain to prove the existence and correctness of that data over the life cycle of the loan.
Andrew Martinez (
And, I know you just, it was, mentioned earlier, but that tri lateral settlement between the warehouse, banks, originators, investors, just curious, what happens there really?
Leah Price (
Yeah, So Tri Lateral settlement is pretty exciting. So in the, now that there's, a blockchain, let's think of, when the loan is sold from an originator through a warehouse lender, all three parties can come to an application. We have an application called Portfolio Manager, where there's the transfer of money's at the same time that there's the transfer of enot control between those three parties, and that's executed in a smart contract within a matter of seconds. So, there's, each party has instantaneous perfection and control of that asset. So, that's very exciting and that's live now.
Andrew Martinez (
Yeah. And, just want to dive into the process a bit more really, how it's, maybe a little bit different from the, traditional loan process. I'm curious, for instance, custodians, what happens to custodians in this process are, are they involved in this process?
Candace Dry (
So that's gonna depend. If you are going to trade a truly digital asset such as an enote e-mortgage and all that, then no custodians are no longer needed because you're putting them into a vault, you're hashing that data and it's traveling with the life of the loan. So there's no need for a custodian to go and verify that information because it's already been verified. Now if we're talking a hybrid situation or a traditional loan closing, then yes, you will possibly still need a custodian in those instances because, you still have the mortgage that has to travel with the loan, and every single new owner or servicer has their own that this is gonna have to be transferred to. So yeah, it's just depends.
Andrew Martinez (
And, also just curious about, the speed of the process, being on the blockchain. Really curious to know how fastly things can go.
Valarie Wagner (
Sure. Providence Blockchain can onboard up to 50 loans a second, which is over a hundred million loans per year. And keep in mind that this is a system that is live 24X7, 365 too.
Andrew Martinez (
And just to clarify, there are mortgages on the blockchain currently, is that correct?
Valarie Wagner (
Right, we have a, a number of use cases, mortgages, helos, other types of loans, private cap table, digital funds, and other sort of natively digital assets are live on the chain today.
Andrew Martinez (
And I'm just curious about the workload for lenders really their workload sees any major change when you're talking about blockchain based mortgages.
Candace Dry (
So, post-closing world, Yes. Because you are taking away the need to have someone constantly touch those documents, constantly QC those documents because it's already being done within the system, you don't have to double check every single document in the post closed realm. you don't have to FedEx note or mortgage, to whether it's a warehouse line or another, document custodian to QC that yet again, it definitely helps to streamline that backend process to allow for that loan to transfer hands more readily and quicker. I mean, at that point you're then taking a lot of the current processes away and making them more efficient and effective, and so, yeah.
Andrew Martinez (
Got it. And then maybe, Leah and Valerie, would you kind of agree, say the same in your experience? You've seen that's the way the process goes, that there's not those extra steps there?
Valarie Wagner (
Right. The loan origination system is pre blockchain entirely, and so that process doesn't change at all. It's really the transaction of ownership of that loan, what happens afterwards that's recorded on the chain. And the complete, like I said, the complete life cycle there isn't part of that NFT record on the blockchain.
Andrew Martinez (
Got it. And, curious about a few other, maybe traditional mortgage pieces of the process, for instance servicers. I'm curious, what happens to servicers and, when they're working with a blockchain based mortgage?
Candace Dry (
Okay. So this is a fun question because, there's current, and then there's this fear, I was gonna say that word wrong. There's some things in the future that we can put in place to really help streamline that process as well. So, for instance, right now, you can go on to the DART UI and, add servicer, sub servicer, all that other stuff. You can show who that servicer is within the blockchain. Eventually, if you think about the blockchain and what it is, and it shows the life cycle of the loan, if servicers are then plugging into the blockchain and pushing data for that particular loan on back onto it, you can see full payment histories, you can see full escrow insurance histories, you can really help honestly, the borrower and the servicer to service that loan properly and effectively. So eventually you could have servicers that are pushing data and pulling data from the blockchain and allowing for a more streamlined servicing transfer process. Anybody that has a loan knows that there's always one payment that is somehow not applied correctly when it's transferred. you would probably get rid of that in this instance because it's all already attached and you just pull from that source of truth.
Andrew Martinez (
And, curious about another part of the process, the borrower, maybe somebody we don't mention all the time, but I'm curious about the borrower. Would they even know that they're mortgages on the blockchain?
Leah Price (
The borrower, So in the case of eNotes, the only slight difference from the borrower's perspective is that the mortgage and the enot will say dart on them instead of, anything else. And then in order to look up their servicer, the borrower will look at dartinc.io, which is our website to see who their servicer is. But otherwise, it really is not a different process for the borrower.
Candace Dry (
Honestly, I think the borrower would like it more because like I said, if we could get servicing on board, I think that the borrower would see a more streamlined, connectivity between all the investors and things, and it would actually probably help the borrower more so.
Andrew Martinez (
And, just maybe want to talk about, the safety, security of, blockchain based mortgages, really, what makes the process secure? What gives the lenders assurance, throughout this process?
Valarie Wagner (
Sure. I'll answer that, sort of from the blockchain perspective, from the user perspective, and that includes originators, investors, servicers, your, your account on the blockchain is controlled through public key cryptography, which is the industry best practice for security, and control. everything that you do, every interaction you have with the blockchain requires the signature of your keys. There's no non cryptographic interaction with the blockchain from the system as a whole. This comes down to what's topically relevant today with Ethereum and the merge you might have heard about provenance is a proof of stake blockchain. And that proof of stake system is how the participants come together to secure the network. And you do that by having a diverse and large set of participants who have, valuable assets at risk. The utility token of provenance is called hash, and you delegate or stake your hash to means to put it up at risk. We have over 70 validators and, no single validator controls a significant portion of the network, and that helps secure the overall system.
Andrew Martinez (
Thank you. And, just also, need to talk about, the cost, what the cost could look like for lenders in this process. And Leah wondering if you could help me walk through, what the cost might be look like for a lender.
Leah Price (
Yeah. So the cost for an originator today without dart, it's $25 to originate to onboard alone and get it, into a system. With our system, we're planning on charging $17 alone. And, so that's an $8 difference, but that explicit cost savings is really just the tip of the iceberg. Candace has described some of the efficiencies that take place post close, that that's, that translates to dollar and time savings. Servicers are also gonna see benefits in terms of having one unified data asset where they can see the mortgage, they can see the enot, they can see other data, and that's in one easily accessible place. Warehouse lenders also will see cost savings and benefits. They'll get instantaneous perfection of that asset, reduced settlement risk, and investors as well are saying that, seeing that they'll see, cost savings. So if you go across those different stakeholders, we're estimating there will be hundreds of dollars, across that and we expect that that will be passed on to borrowers ultimately.
Andrew Martinez (
Awesome. And, just wanted to talk about maybe talking about mortgages here, but technology, I'm curious, maybe it's used for other types of loans in order to mortgage conference, but curious if, there's a future for, let's say, auto loans or other types of transactions on the blockchain here?
Leah Price (
Yes, absolutely. So mortgages, where that's probably the hardest use case, and we're starting there, but there are other, asset classes that are already very well suited to blockchain, under e-sign and uda. So auto, as you mentioned, commercial real estate is a big one. chattel is another. So we're really excited about this expanding universe of digital assets that are gonna be well suited to blockchain.
Andrew Martinez (
And maybe just talking about, the partners that could be involved in this process, I understand there's a few partners in the process already involved, but, I'm curious, about, really just what kind of technology vendors can, fit into this blockchain based mortgage process?
Leah Price (
Yeah, so for Dart specifically, the big integration partners are l os providers. So, we're, we make it as easy as possible for originators to get set up. We've got API specs and documentation ready to go. It's pretty simple. I'll, point out, and this is a later question, I think, but you don't need to have blockchain expertise to play in any aspect of this system. We've got blockchain experts at Provenance Blockchain Foundation. The applications that we build, they're all API based, they're very easy to integrate to. So we're really focused on LOS integration and then also doc prep company and eval solution provider integration. we're, we're integrated with DOCUTECH right now. It's been a pretty easy process, for them, so we're excited about that.
Andrew Martinez (
And maybe just a quick question on that too. When did that, partnership occur? Was that earlier this year, or?
Leah Price (
Yes, we announced that earlier this year. So they're, really excited to be the first, Evault solution that's integrated with dart.
Andrew Martinez (
Got it. And, just so that question too, of the technological expertise and really just opening it for anyone here, do you ever find, that lenders have blockchain experts on staff? I'm curious the knowledge level when you work with some partners, if you maybe are pleasantly surprised that people kind of understand the process, or do you still find that, it's still kind of a big learning curve for the industry right now?
Candace Dry (
So, yeah, I would say that it's still kind of a learning curve for the industry, because let's face it, when most people think of blockchain, they think of, NFTs and random pictures and cryptocurrency. So yeah, trying to get, the industry to understand what it could be and what it could do for the mortgage industry is sometimes a hurdle, but once we get there, they wanna know more. So, I think we're heading in the right direction.
Andrew Martinez (
Yeah, if you'd like to,
Valarie Wagner (
In terms of getting started, I like to, and it's my job to coach other companies on how to build new financial use cases on the blockchain. So I have this discussion every day. There are really sort of, as I think of three ways to get involved in the blockchain, the first and easiest is to use the applications that are built on top of the blockchain. Like dart like portfolio manager figure has an alternative trading system, zero sign has a document solution and others. And so you can use those capabilities without having to talk to or fully understand the blockchain yourself. It's, it's of course, I think, a value to know ultimately what and why you're using a blockchain and what value that brings and how it works. secondly, many of our, builders on Providence expose business level APIs, which are the same format that all of your engineers know how to speak to very well. And thirdly, for really novel use cases, you can talk to the blockchain yourself, it's public open source. You don't need to be, there's no gatekeeping by any, the foundation or anyone else, and there's libraries and tooling to do that. So, it really depends upon what level you wanna integrate and how far into the blockchain world you wanna get. I also like to tell people it's not an all or nothing solution. There are ways to, to do your full system on blockchain or more or less, depending upon what kind of value you're trying to get out of it.
Andrew Martinez (
Thanks. And then, maybe just talking about, again, maybe, this, knowledge, I don't wanna call it gap, but really just this knowledge barrier. yeah, I guess so, just curious if, you hear other common, maybe misconceptions, maybe a common question you hear partners, ask when approaching this process?
Leah Price (
Yeah, I'll say that, one difficulty when talking about these applications is that there's, there can be confusion between like what's happening at the blockchain infrastructure level versus what's happening with the application. And as Valarie was saying, to use these products, you actually don't need to know very much about the blockchain itself. We try to make it really easy. Most people are very curious. If I was to answer the question, what's a misconception, which is really unfortunate, is that sometimes people assume, they'll say that blockchain is bad for the environment, which as Val pointed out, provenance is a proof of stake blockchain, so that doesn't have the negative impact on the environment as others. So not all blockchains are created equal.
Andrew Martinez (
And then, sorry, just to maybe quickly, describe that term, you just used, if you could maybe, I couldn't recite it on the spot. So curious you could help me understand what exactly that means. Proof
Leah Price (
Proof of stake, yeah.
Valarie Wagner (
Sure, As I said, this is in the news just today because the Ethereum blockchain is famously converting from a proof of work to a proof of stake blockchain as we speak. Bitcoin is the original blockchain it used. When you have a a distributed system, you need to have some way of ensuring that people aren't putting on fake transactions or other kind of malfeasance. And so you have to make it somehow costly for people to do that. And the original Bitcoin blockchain uses something called proof of work, which makes computers solve really hard math problems. And the first one to solve the math problem gets to add the next block. And so there's a cost, you there's something at stake, which is your time and energy and that computer network. and that one is really energy consumptive. Proof of stake is the probably second major, way to secure your network. As I said, you have a, some kind of asset as at risk, and our utility token is called hash. And so in order to run a node and be a validator and earn the right to be able to add a block, you have to put some of your hash, a large amount of hash, what we call staked. And so that means that you delegate your hash to the node and if you misbehave or you go down for a long time when you're supposed to be part of the network, that the network can confiscate part of your stake. And so that is the alternative way of ensuring good action and good behavior on the network.
Andrew Martinez (
Awesome. And, now we're, close to wrapping up here, but maybe before I move on to a final question or two here, just curious if there's, anything else really that, in this whole process that I didn't get to here, something that crucial that lenders, maybe last message you wanna let lenders know or mortgage players know about this process?
Candace Dry (
It's not as scary as you think. when I first came over to figure lending, I had, I thought they were crazy. But as I understood it more and more it makes sense and it really could revolutionize the way that the mortgage industry works and we transfer loans and data within our system and to other, investors, securitizations, things like that, so yeah.
Andrew Martinez (
Leah, Valerie, would you like to add anything else parting thought on blockchain from.
Leah Price (
Oh, well, I wouldn't say parting thought, but I would reiterate that Candace was not into what we were gonna do with dart. So, the fact that she is on this panel right now saying that she's a hundred percent in is you take that for a lot.
Valarie Wagner (
The one thing I would add is that, it's pretty clear that the future of finance includes programmable money. And to be able to do these automated bilateral exchanges with instant finality and proof of stake, blockchain does give you that instant finality, is really a powerful capability that's gonna be the way of the future. And so, there's not, as our CEO Morgan McKinney says, there's not one size fits all for digital money. There are, there are different types. There's stable coins, there's digital markers, provenance, ecosystem includes something called USDF, which is a bank minted tokenized deposit representation of a bank account on the blockchain. And so there, gonna be many solutions to the way to do finance of blockchain in the future.
Andrew Martinez (
Awesome. And, appreciate the insights here, but just wanted to wrap up with, one question. I wanna acknowledge the panelists here. It's three women in technology leadership roles and, really just a pioneering industry, let alone mortgage technology. And just wanted to ask each of you really just, how impactful it is to be a woman in a leadership role in this space, I guess blockchain and mortgage technology. And, how can the industry promote more women in these roles?
Leah Price (
I would say the industry needs to promote more women in these roles, full stop.
Candace Dry (
So, I don't know how to kind of push forward with getting more women into these roles. I do want to, speak to my past experience and kind of what hindered me originally to get into leadership within the mortgage roles, was that, I got out, I did law school and I got into the mortgage realm. And because I had no mortgage experience, I thought that those skills that I learned in law school weren't gonna be transferable. And so I thought I needed more experience, even though a lot of the skills that I learned in school actually are what help me to excel in the industry. So, I would say that for women in general, trust your gut and know that your experience and other assets can push you into those roles and don't stop trying.
Valarie Wagner (
So as I mentioned before, I was at, Providence Blockchain Foundation. I was, I was at figure and it was an extraordinary experience for me being there. I joined a few months after figure was founded, and four of the five founders were women. And having women in those top leadership roles and women in the room from day one really made all the difference at figure figures, a very female friendly company. I felt, the tech industry for software engineers stubbornly for decades is sitting at 15% women and doesn't move. and that is a, that is a statistic. We all, struggle with daily, trying to get more women in into software and tech. The thing that I have observed is if there are women on the team from day one, then more women will join. I've seen teams where it's an all male team and the team grows and no woman wants to walk into a room of 20, 30, 50 guys and wonder what's wrong? Why are there no women there? So, having women in those leadership roles and having women on the team from day one, I think is how you grow more female participation. And as I said, our CEO of Providence Blockchain Foundation, also Woman Morgan McKenney.
Andrew Martinez (
Yeah, awesome. Really, good answers. I think there's no way we can follow that up. So, appreciate that very much. thank you everyone, for attending and yeah, thanks to our panelists.