A third-party trade that would normally take 20 days has been processed instantly on a blockchain, demonstrating the “significant efficiencies” fintech can bring to the $400 billion real estate loan market.
Figure Technologies founder and CEO Mike Cagney said that its Provenance network was used to execute a bridge loan transaction between lender Pacific Private Money and asset management firm Saluda Grade—eliminating the need for intermediaries and reducing the cost, time, and friction involved.
In the real estate market, a bridge loan tides a house buyer over between buying a new house and selling an existing one.
“The short duration transitional bridge loan market is the perfect asset class to benefit from Provenance’s operational efficiencies,” said Ryan Craft, CEO and founder of Saluda Grade. “[L]enders like Pacific Private Money can digitally originate and quickly distribute loan production seamlessly to institutional investors.”
He added, “We hope to onboard our whole portfolio of alternative lenders to the platform.”
Pacific has committed to making $100 million in loans and sales transactions on Provenance in the coming 12 month, Figure said in a release.
Just the beginning
Cagney described the successful transaction as a “huge step forward for blockchain technology,” and expressed hope that it could deliver cost savings across the whole real estate loan market.
His is far from the only blockchain company working on disrupting various parts of the real estate market. According to a 2019 report by CB Insights, “How Blockchain Technology Could Disrupt Real Estate,” bringing mortgage loans onto blockchain platforms could save the industry about 20% of its expenses. That’s $1.7 billion. Other areas of interest range from land registries to the tokenization of real estate, allowing small investors access to the market.
Figure said that its infrastructure also has the potential to transform the lending experience for consumers, meaning applications can be turned into funding in days instead of weeks or months.
“Having been in the financial industry for years, it was thrilling to see firsthand how this technology is going to transform financial products of all kinds, bringing speed and cost savings across the entire financial landscape,” said Mark Hanf, CEO of Pacific Private Money.”
Saluda Grade, which includes Pacific Private Money in its portfolio, had purchased loans from the company on behalf of third-party investors. The blockchain-based, third-party trade, which took place on May 1, allowed it to take receipt of these funds.
According to Figure, Provenance has already handled transactions of more than $1 billion in assets.
In March, the company announced that it had issued what it said in a release was “the first ever securitization backed by loans originated, serviced, financed and sold on blockchain.”
By handling every step of the asset-backed securitization, the fintech said the “collective benefit of blockchain to the parties over the lifecycle of the loans totaled over 100 basis points”—that is, more than 1%.
That lead Figure to estimate that the technology could deliver potential savings of more than $30 billion in the annual securitization market, which is worth $3 trillion.
Figure also offers mortgage and student loan refinancing to the public—adding that it plans to “continuously expand its portfolio of financial products.” It has released television ads in which its blockchain appears as an animated character.
In time, Figure hopes that this expansion will enable the Provenance blockchain to process loans for prominent financial companies worldwide.