This week, the Hungarian National Bank (MNB) unveiled a new DLT platform involving the country’s main banks and insurance firms. It provides a blockchain-based database to coordinate data sharing about insurance policies needed to support mortgage loans.
For new mortgages, typically the borrower will visit the bank for the mortgage and then again to demonstrate they have secured the necessary insurance. Banks require insurance coverage to protect their collateral in case of floods or other major damage that could reduce the value of the house. By creating the DLT network, the second visit by the house owner isn’t necessary. For existing mortgage holders who switch insurers, they also no longer need to visit the bank.
The DLT Home Insurance system was jointly developed by the central bank and the insurance and banking industries. Eight mortgage providers and eleven insurers are involved and expected to join the network by mid-year. The Hungarian market has 622,000 home insurance policies that include a mortgage cover clause.
For the institutions taking part, the paperless data transfer reduces administrative work and reconciliations. Both the data transfer and queries are logged, providing transparency. Only the insurer and the bank have the right to see the data, with the data sharing made in compliance with GDPR, which means the homeowners provide consent. The central bank does not have visibility.
Mortgage DLT projects elsewhere
Given the amount of reconciliation involved in mortgages, one would expect blockchain to be widely used. There have been a fair number of projects in this area. In the United States, Figure Technologies has been one of the biggest proponents. The Figure group advances home loans that are registered on the Provenance blockchain. It also rolled out its blockchain mortgage registry to other lenders.
In the UK, Coadjute has created a DLT system to smooth the home buying process. Several banks invested in Coadjute last year.
Source: ledgerinsights
