The Basis Point

My friend Chelsea at Sagent did a good writeup of a webinar I recently hosted on getting real about mortgage blockchain. She succinctly recaps 7 key topics in my deep dive with Dan Sogorka and Mike Cagney. Dan is the CEO of Sagent, a software firm powering America’s giant $12 trillion mortgage loan servicing industry. They’re backed by Warburg Pincus, where former Treasury Secretary Tim Geithner is the President. With this backing, Dan has been moving fast for the past 18 months to modernize mortgage servicing software. But also looking for big, disruptive shifts in the mortgage originations, servicing, and securitization ecosystem. One of the deals he’s done is partnering Sagent with Figure and Provenance. Mike was the founder of SoFi and now Figure, which is fintech lender and payments company — aka a challenger bank for consumers. But Figure — founded in 2018, already a unicorn, and one of the most successful challenger banks of this cycle — is really just a means to a much bigger blockchain end. Mike and the Figure founding team also founded Provenance Blockchain at the same time. They believe that Provenance can be the ubiquitous blockchain serving real finance. Today, Ethereum blockchain is most involved in finance — called decentralized finance or DeFi in crypto geek talk — but most of what it and its associated apps power is ways to buy, sell, and generally work with assets that are already digital/crypto. This isn’t helpful to a highly regulated, dollar-denominated consumer finance landscape. The Provenance team believed they could go to big institutions and say: hey you should originate and service all your consumer mortgage, auto, personal, and student loans on Provenance so they’re digitally native, and then you can cut out many middlemen in the origination, servicing, and securitization ecosystem. And all these institutions — knowing crypto and blockchain is going mainstream in other areas outside consumer finance — said: yea, sounds interesting but we’re not going to take your word for it. So the team used Figure as a proof case to originate, service, and securitize personal and home equity loans. Three things have happened as a result: (1) Figure has gotten big banks to participate in native Provenance Blockchain securitizations, and momentum is growing because — in the example of home equity loans — Provenance has cut 117 basis points (1.17%) of cost out of the process. This is HUGE when talking about loan pools worth hundreds of millions each. (2) Figure purchased a $20 billion per year mortgage originator, Homebridge, that’ll now come under the Figure brand. And in the coming year, new mortgage blockchain proof cases will begin using first-lien mortgages (in addition to just home equity). (3) Most important, Provenance now has billions of real consumer and home equity loan volume done on it, and Ethereum so far has little to none. So that’s a good background setup for these 7 questions (noted below) that’ll Chelsea covered. For today, I’ll conclude with this: It’s no longer acceptable for mortgage and housing execs saying “mortgage blockchain is a solution looking for a problem.” This phrase is clever but meaningless. It’s time to learn how this all works. I’ll keep posting on this topic to help that education process. And on that note, go read Chelsea’s post. It’ll help. 7 Key Questions On Mortgage Blockchain – What will digital disruption in mortgage look like as blockchain becomes mainstream? – What are the major benefits of bringing mortgages onto blockchain? – What is Provenance Blockchain, and will it be the blockchain winner for mortgage and consumer finance? – How does Provenance Blockchain work with mortgage assets? – How does blockchain make mortgage servicing rights trading easier? – How are big mortgage software firms like Sagent working with Provenance to realize this vision? -Have Fannie Mae & Freddie Mac provided any feedback about mortgage blockchain or tokenization? ___ Reference: – 7 Key Questions On Mortgage Blockchain Viability Answered by Provenance, Figure, Sagent

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