Simplifying Home Loans

Home loans and mortgages are based on a complicated value chain with a growing number of parties, and an increasing wait time between submitting an application and reaching settlement.

Cross-border payments are complex, risky, and subject to high jurisdiction. Additionally, FX rates are often not fixed until the arrival of funds, with a complex multi-stakeholder process creating opacity. 

Estimates place the global residential mortgage market at $31 trillion. With 66 percent America having a mortgage on their house as much as 70% of the populations in the UK and China, mortgages are perhaps the area in which Financial Institution's most closely interact with the average consumer. This means that they are a particularly sensitive pain point, and more exposed than others to the public.

The average time between submitting a home loan application and reaching settlement is 30-60 days . This period involves a complicated chain including customers, mortgage brokers, bank officers, originators, warehouse lenders, underwriters, solicitors, real estate agents, and more.

Moreover, the average mortgage closing costs sit at around 2 to 5 percent of a property's value, meaning on a $250, 000 home, a buyer could pay anything from $5000 to $12500 just to obtain the mortgage. 

In 2015, PWC reported the average mortgage application to be over 500 pages. They estimate each intermediary adds 1 - 2% of the property’s value in their own fees as well as days of processing time.

The current mortgage process is lengthy and cumbersome, following the below steps:

1. Buyer applies for mortgage from a bank
   1. Buyer provides multiple items of documentation such as bank statements, proof of income, existing loan information, and consent for a credit report to be compiled by an external credit reporting company
2. Bank employs a surveyor to conduct a preliminary property evaluation
   1. Bank decides on an estimate loan number
3. Bank begins the credit approval process based on the information provided from buyer and 3rd parties
4. Bank confirms property ownership with land registry offices, based on the information of the seller
5. Bank request a final property valuation from the surveyor
   1. Bank cross-checks final valuation with approved amount of credit
6. Bank notifies buyer and solicitor of decision
   1. Arrangements are made to sign the necessary documents (loan agreement and deed)
   2. After documents are signed, bank initiates the drawdown of funds and land registry offices can be informed to update title deed

There are three key challenges inherent to this process, creating bottlenecks and inefficiencies.

1. Increased Costs
2. Increased Timeframes - Each intermediary adds delays and lags of their own, in addition to an already lengthy process.
3. Lack of Transparency - each 3rd-party holds their own documents, and requesting access is a manual process that can take a few days
4. Lack of Coordination - information must be updated separately on each party's ledger, and verified by a 3rd-Party.