Before I begin, I feel it is important to note that I have no personal association of any kind with the company (VIVA) that I will be talking about. VIVA is simply a platform that, in my mind, exemplifies what mortgage lending will look like in the future. In all probability it is is one of many suppliers of mortgage financing and mortgage investing that is primed to displace conventional mortgages and the behemoth “big banks”.
The concept is simple:
In its simplest form, the concept is that home purchasers will have the ability to crowd source the funds they need to purchase or refinance their home. On the other side of the transaction, investors will be able to invest collectively in these mortgages.By doing this, conventional banks will be out of the equation. They simply won’t be needed.As a result, both the borrower(s) and the investors(s)
work directly together and bypass today’s middlemen — the big financial institutions.
Benefits to the borrower: Lower interest rates saving as much as 20-40% of total interest expense Not tied to local or even national rules since they have access to international money Fast, easy and transparent, completely free of cumbersome banking practices User friendly and easy to use online platforms
note: Sample dashboard only for example purposes.Related: Timing the Market vs Investing in Real Estate
Benefits to the investor: Higher returns due to efficient structures Reduced risk since all mortgages are insured Liquidity since the investment shares can be sold on the open market Complete transparency as they can see all the details while borrower privacy is protected
How it works:
Mortgage applicants submit their information and the application is vetted by qualified lenders.Once approved, VIVA uses blockchain technology and digital currency
to allow investors to purchase shares in specific mortgages. By using blockchain, users are guaranteed that the information is safe, secure and accurate. A detailed explanation of blockchain is beyond the scope of this article.Investors are protected since every mortgage is insured by private mortgage insurance policies.Investors select the mortgages they want to purchase shares in.All payments from the borrower and to the investor are handles through crypto currency.
It will likely take some time for borrowers to feel comfortable with the system. Early adopters will need to carry the torch for a bit. But, once there are successes and once word of mouth sells the ease and financial benefits we are set to have revolution in mortgage lending.