Liquid Mortgage, a patent-pending startup that uses blockchain technology to connect borrowers and lenders, has secured an investment from Redwood Trust.
Financial details were not disclosed, but the companies said the investment was the culmination of a multi-month engagement between Liquid Mortgage and Redwood in developing an “actionable strategy for achievable and beneficial improvements to targeted elements of the mortgage ecosystem.”
Liquid Mortgage’s digital investment and payment platform marks a loan as it arises or when it is purchased. Then all payments, trades and transactions of the borrower are recorded in a single blockchain, in which borrowers can manage payments and data about the term of the loan. The startup is also working with originators to lower mortgage rates.
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The companies also stated that they were focused on improving processes in a specific market: the non-agency mortgage sector. In particular, they plan to use blockchain to streamline post-deal buying activities, service, securitization and secondary trading. Companies believe they can reduce credit, friction and transaction costs, as well as increase transparency and execution security.
“The outside of the agency mortgage industry continues to rely heavily on outdated manual processes that have existed for decades due to an accepted and in some cases desirable status quo,” said Christopher Abate, CEO of Redwood Trust. “As a leader in real estate finance, we focus on disrupting the market with innovative solutions that help everyone, especially borrowers.”
In addition, the companies said they are working with various industry partners to investigate the use of blockchain to provide RMBS investors with faster credit transfer data. This improvement could significantly improve market liquidity. You recently placed a Redwood-sponsored Sequoia securitization on a blockchain in a test bed.
“While the use of blockchain technology in the mortgage industry is still in the early stages of development, it is one of several key ways we want to use technology to evolve our operating platforms,” said Abate. “We look forward to sharing more details on our technology roadmap in the coming quarters.”