Ever heard of peer-to-peer (P2P) lending that came with the introduction of the Blockchain technology? Also known as alternative finance, P2P lending is a process where individuals are able to lend or borrow from each other without the influence of a third parties like banks and other financial authorities.
Blockchain technology has created many new possibilities for P2P lending, so much that it is now considered as the next best thing in Digital Ledger Technology (DLT), following the introduction of decentralized payment systems like Bitcoin and other cryptocurrencies.
The Homelend’s P2P Mortgage Lending Platform
The mortgage industry is quite vulnerable from a social and financial perspective. With loans being considerably large, defaulting creates an undesirable situation for families and individuals when facing a foreclosure. And, while there are a number of blockchain-driven P2P lending platforms for consumer lending and microloans, a platform for the mortgage market is yet to be developed. Well, until now!
This is how Homelend’s P2P platform works; it embeds the mortgage lending business logic into the smart contract feature of blockchain technology. Creating a group of smart contracts built to carry out business processes, Homelend enables individuals to lend money from each other in a secure, transparent, and of course, trusted way. The concept behind the platform is to remove the financial authorities linking lenders and borrowers and replace them with smart contracts that execute a predefined business lending logic automatically.
The collection of information in Homelend’s platform is done in an “all-digital” manner, and this does not exclude the data that resides in paper-based documents. These are transferred to a digital repository built on the distributed ledger technology.
The data provided by users is double-checked using professional verification providers, and once they are verified, a smart contract built on algorithms automatically executes an assessment to check the creditworthiness of the borrower’s application. If the assessment comes back satisfactory, the smart contract will then issue a preapproval of the mortgage loan application.
One thing to take note of is that the borrower’s creditworthiness assessment is not carried out by humans, but rather by a sophisticated group of pre-defined approval situations that have been created prior to the application. The smart contract then makes a pre-approval decision based on the specific situation built on the information provided.
Though the entire mortgage lending process cannot yet be fully automated, Homelend’s platform does not only reduce the number of people but also the number of steps involved in mortgage origination.
What's Next
The Homelend P2P mortgage lending platform makes use of smart contracts in executing the business logic of the mortgage origination process, which in turn creates a medium where lenders and borrowers freely interact without third party intermediaries. This is definitely a step into digitalizing the mortgage industry.
In my next article, we'll be going into the details of how Homelend uses smart contracts to facilitate their transaction, as well as giving you a general idea of how the business will flow once it's established. For more information on Homelend, be sure to check out their website
Disclaimer: As with all investments, you should do your own research. The information provided in this article is focused primarily on bringing the facts out of the white paper to supplement your due diligence. Please do your own research and make up your own mind.
Links:
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