Dossier: Three ways technology is changing the mortgage market

In any word association game, saying “blockchain” will surely bring Bitcoin to mind. But the technology behind digital gold is much more versatile than many realize.

Essentially, the type of blockchain that powers Bitcoin is a public ledger shared by each party that is updated in real time whenever a transaction is made. These transactions are checked against each other before being validated, which means that it is impossible to make false entries.

It could even use data for transactions yet to be completed

There are also other types of blockchain. Corda uses “nodes” to connect to a shared registry. These nodes need permission to do so, which makes the blockchain private. When data must be shared between users, only the nodes concerned are updated.

Coadjute uses this technology to link real estate transaction market sectors. Each business, whether realtor, realtor or otherwise, uses its own node (which can be placed behind a firewall) to connect to the main Coadjute network. Thus, whenever data of any type involved in a transaction is updated, each participant is immediately informed. A real estate transaction can be monitored in real time.

Since all data can be transferred this way, things like title deeds may one day flow across the network, along with funds. These funds could take the form of a “stablecoin” – virtual money that can be programmed to ensure it is used for a specific purpose, and only with verified parties.

Saying I have a pilot’s license – albeit for a drone – is a strange experience

The potential doesn’t stop there. All data can be granted permissions at an extremely granular level. Coadjute General Manager Dan Salmons gives an example of how this can be used.

“While Coadjute cannot see your house price data, if you set a permission for the network itself to see it, we could take it into account in creating a house price index. It could even use data for transactions yet to be completed.

MAV Broker

For a broker, there must be few things worse than letting a client down with the news that their dream property is simply out of reach. Late last year, Hometrack released its Automated Broker Rating Model (AVM), which helps manage customer expectations. Built using the same architecture as the AVM that Hometrack provides to lenders, the broker version provides two types of data through various mortgage platforms.

The first is an indication of the price range in which a property should be placed.

The second gives details about the property – whether it’s a semi-detached or detached house, for example, as well as the building materials used and other data points. This will also remove incongruities. A potential borrower may say the house has four bedrooms, but it is actually a three bedroom house with an extension. This, according to Hometrack’s vice president of products and technology, Spencer Wyer, “flags these issues so that brokers can have conversations with their customers as soon as possible.”

We soon realized we could use the drone to take aerial photos and videos of downtown properties.

For rental properties, the model provides information such as rental valuations. If the model can’t find an address – perhaps a house has been converted to apartments – it analyzes hundreds of similar property types and returns data with a “low confidence” indication attached.

Wyer says, now that the model is built and integrated, the next task is to educate brokers on what AVM can do and how it will help them. To this end, the firm organizes events and webinars.

Plans for the technology itself will see the integration of whatever other data brokers want – perhaps climate data, which Hometrack currently provides to lenders. It could also be used to help brokers process other types of data, such as income expenses through data pulled from Open Banking.

Aerial views

Technology is not limited to databases and platforms. Sometimes it can be more tactile. For example, the team from the law firm Aberdein Considine flew drones. Grant Martin, head of social media and content market, explains that the company initially used the technology to present large land properties to its clients, “but we soon realized that we could also use it to take aerial photographs and videos of downtown properties”.

AVM flags issues so brokers can have conversations with their clients as soon as possible

In one example, a drone flies to a property at street level and then up to a glass penthouse. In another, he sweeps the grounds of a castle turned into apartments.

Aberdein Considine has derived many benefits from the publication of these spectacular images. It is used for social media and marketing, as well as cataloging properties. And the value goes beyond real estate transactions. For example, people who blog about Scottish architecture and history have found the content and engaged with it, expanding the company’s digital footprint.

To do this within the limits of the regulations, Martin had to obtain his drone pilot license.

“It was very interesting to sit down and think about things like wind speed,” he says.

“To say that I have a pilot’s license – albeit for a drone – is a strange experience.”

Previous Remortgage instructions down 26% in March: LMS
Next Foundation expands Green ABC+ mortgage options for homeowners