Redwood Trust has made an unquantified investment in Liquid Mortgage through its new technology venture arm, indicating that blockchain automation tests that could improve loan record keeping are continuing.
The real estate investment trust's interest in blockchain is substantial as it is a closely watched and influential player in the private securitized mortgage market. Redwood was a pioneer in restoring this market after the Great Recession, which faced risks associated with tracking performance and asset ownership.
These are exactly the risks an indelible digital ledger like blockchain could face if the mortgage industry could find a manageable and inexpensive way to set one up. According to a company announcement, Redwood may have found a way to do it.
"By initially refining our focus on the investor market after it emerges, unique benefits of technology can be more quickly leveraged to improve the underlying infrastructure for the entire industry," Redwood stated in a paper posted Monday at Wilmington Trust has been published.
Finding a way to implement blockchain system-wide in a relatively short time has been a key challenge, as experts have claimed that its benefits will only be fully realized when most lenders are able to take advantage of them.
To this end, Redwood is specifically experimenting with an "originator-independent" approach that would allow lenders to use blockchain when selling loans in the REIT's securitisations.
So far, Redwood has been able to place all of the loans from one of its recent Sequoia securitisations in a test environment on a blockchain, but has not yet rolled out the technology for wider use. However, it invites inquiries from companies interested in helping with their testing.
While Redwood has called the roadmap created for blockchain implementation with Liquid Mortgage exclusive, it is by no means the only mortgage company in the market working on ways to implement this type of technology.
Other recent examples include the online lender figure Figure, led by former SoFi CEO Mike Cagney.