Blockchain Startup Aims to Make Mortgages Accessible

As it stands, there is a huge wealth gap in the USA - and it’s showing no plans of slowing down. The rich continue to get richer, while the most disadvantaged in society continue to get poorer.

Meanwhile, the value of mortgage debt in continuing to climb.

American debt has reached $13.15 trillion as of Dec. 31 2017 - $193 billion greater than the previous quarter. Approximately $139 billion of this increase can be attributed to mortgage debt.

Too Many Are Being Excluded From the Housing Market

It’s widely known that racial minorities are less likely to own a home in the US. If they do, it is likely to be one of lower value.

As of 2012, three-fourths of white families owned a home. In comparison, less than half of blacks and Hispanics owned a home. In addition, the median home value among white owners was an average of $45,000 higher than the home value of black homeowners.

There have been reports that Hispanic people with limited English proficiency are at a significant disadvantage in getting home loans, simply because Spanish translations of mortgage documents are unavailable in their local banks.

Of course, these translations are widely available on the Internet, but the reality is that individuals are not being given the assistance they require by staff members at these institutions.

But it’s not just racial minorities that are being excluded.

For instance, it’s no secret that many people in the Millennial generation are finding it extremely difficult to get a mortgage loan. There are many reasons why this is the case, but one of the major contributing factors is undoubtedly their student loan debt, which negatively affects credit scores.

Unfortunately, neither the education level nor the profession of an individual is taken into consideration when applying for a mortgage loan, and as a result, they are often rejected outright.

Can Blockchain Technology Help Us Make the Mortgage Industry Fairer?

Blockchain technology has opened up a plethora of new fundraising opportunities. In particular, it has made peer-to-peer crowdlending a possibility.

Peer-to-peer crowdlending enables individuals to be assessed on fairer, more reasonable grounds. It brings together lenders and borrowers in a new model that significantly benefits both parties.

New blockchain startups like Homelend are leveraging this model in attempt to make mortgages accessible to all.

There are many advantages to using a decentralized lending model over traditional banking and loaning systems.

Most notably, these advantages include increased opportunities for borrowers who have been locked out of traditional systems, lower interest rates, increased security, and less risk and higher yields for lenders.

Blockchain Offers Increased Security

Traditionally, in a non-blockchain scenario, databases will be under the control of a single organization. In the case of a bank, these databases will have extraordinarily high levels of security, which is why individuals trust these systems to handle their money.

However, even these extreme levels of security will not make these systems totally invulnerable to hacks. If an attack is successful, the attacker will be able to steal extremely large amounts of money.

The blockchain, however, is an extremely secure, immutable ledger that records the history of all transactions. Each block is connected to all the blocks that have come before it, meaning it is extremely difficult to hack into, as the hacker would need to change all blocks that are linked to the record they are trying to tamper with, as well as the record itself in order to access it.

A Simpler, Fairer Approach to Lending and Borrowing

Despite the increasing size of the mortgage industry, the system ultimately remains dull, archaic, and highly regulated. It has been completely devoid of innovation for many years.

This new peer-to-peer social loan model based on blockchain technology will be a much more efficient way to obtain a loan of the vast majority of aspiring homeowners than traditional systems. It has been specifically designed in order to help those who need it most.

It’s not a complete solution, but it is hoped that such a model will certainly be a significant step forward in solving the housing crisis that has swept across the country.