Digital Mortgage: Experiment to Issue Blockchain-Based Electronic Mortgages

Contents:

1. Benefits of digital mortgages
2. Practical experience
3. Experiment on issuing blockchain-based electronic mortgages

Digital Mortgage: Experiment to Issue Blockchain-Based Electronic Mortgages

The development of digital technologies has affected all areas of our life, including bank lending. Many banks have started offering a new service called digital mortgages. Its essence lies in the fact that a mortgage transaction is carried out completely remotely through digital services.

To implement such plans, it is necessary to digitize all stages of a loan: filing an application, market valuation of a real estate object, insurance, state registration of a purchase and sale transaction. For these tasks, special digital solutions are used that banks are implementing in their work.

Benefits of digital mortgages

According to experts, digitalization of mortgage lending makes it possible to bring banking services to a completely new level. Real estate loans have their own characteristics. Bank customers do not take out mortgages as often as they take out consumer loans or make money transfers. According to statistics, the share of mortgage lending in the range of banking services is no more than 1-5%. This even applies to large banks, which are the main market participants. The costs of creating their own infrastructure for digital mortgages are quite high, so most banks consider it economically impractical. Cloud technologies act as an alternative to their own ecosystem. These are ready-made IT solutions thanks to which all banks can automate the process of obtaining a loan.

The transaction can be carried out quickly and comfortably with only a smartphone at hand. It is no secret that the usual format of mortgage lending is fraught with a lot of hassle, because the borrower has to spend a lot of time on bureaucratic procedures. Translating a transaction into an online format provides not only convenience, but also security. The demand for digital mortgages has grown significantly over the past two years due to the pandemic and the restrictions that come with it.

When appraising real estate online, a potential borrower does not need to go to the appraisal company, meet with its employee, or take documents to the credit department. Assessment of the object is carried out remotely, after which the report is sent directly to the bank. The same happens with property insurance: the insurer sends the finished policy to the bank. Electronic registration of a transaction in Rosreestr takes half the time compared to a conventional paper transaction. In this case, the client does not need to visit the MFC.

The digitalization of mortgage lending processes increases the speed of processing a transaction due to its automation, which contributes to an increase in conversion and reduces the burden on employees of a banking organization. They can focus on improving the quality of service and solving other issues as part of their activities.

Practical experience

The stable demand for digital mortgages was announced by specialists from the largest Russian banks that issue loans for the purchase of real estate. According to a representative of Otkrytie Bank, during the pandemic, the share of sales in the digital channel on mortgages has doubled.

Alfa-Bank specialists also note that reducing paperwork through the introduction of digital technologies is a strategic task for a credit and financial institution. The most popular among the bank's clients are online services for real estate appraisal and electronic registration.

At Rosselkhozbank, the digitalization of mortgages has been implemented thanks to the "Own Housing" ecosystem. Currently, every fifth loan application is received via a digital channel.

Experiment to Issue Blockchain-Based Electronic Mortgages

On September 3, Prime Minister Mikhail Mishustin signed a decree on the beginning of an experiment to issue electronic mortgages based on the blockchain. For the implementation of the project, the Russian technology "Masterchain" is used. The project will start in December and finish by October next year.

Within the framework of the project, remote information exchange between the bank, Rosreestr and depositories will be carried out using the Masterchain platform. A mortgage is a document that confirms the owner's right to property, which acts as collateral for a mortgage loan. The mortgage is drawn up by the bank when the loan is issued and, after being signed by the borrower, is kept in the depository until the loan is repaid. The document is subject to registration with Rosreestr.

The purpose of the new experiment is to automate the issue of a mortgage. The procedure allows you to reduce the time for issuing and registering a document to one day, while when working with paper mortgages, this process takes more than a week.

A4 Law Firm specialists will advise you on any issues related to the digitalization of mortgages.