Blockchain Applications in Real Estate Finance: Mortgage Origination, Securitization and Servicing

Recording of a 90-minute premium CLE webinar with Q&A


Conducted on Thursday, October 24, 2019

Recorded event now available

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Program Materials

This CLE webinar will familiarize real estate finance counsel with some of the current and potential uses of Blockchain and distributed ledger technology (DLT) in commercial mortgage origination, securitization, custody, and servicing. The panel will also discuss the legal and regulatory hurdles companies may encounter in moving transactions onto a distributed ledger or Blockchain.

Description

Blockchain has begun to revolutionize commercial and residential real estate finance and the manner in which transactions are closing continues to change today. Early pioneers using DLT and Blockchain technology have developed a wide range of applications which have survived pilot programs and continue to be used in commerce today. A single Blockchain can embody all transaction information in one digitally-shared, electronic document with transaction participants each getting appropriate credentials.

This means that closing real estate transactions is a far more efficient, trustworthy and rapid process relative to the Old School method which we as practitioners believe will eventually go the way of wall-mounted rotary phones and Blockbuster Video stores. The question is not if this will happen, but when. As a more trustworthy process, the ledger is updated and viewable simultaneously by members of the network with safeguards against tampering. Whereas mortgage origination via DLT/Blockchain has already begun in leading markets, mortgage-backed securities (MBS) and A/B structured loans are also particularly well suited for DLT applications. Over time, the traditional escrow will become obsolete as well as other functions that we all see, use and accept today -- and this webinar will bring that into sharper focus.

Today's securitization process involves review by broker-dealers, issuers, investors, accountants, attorneys, rating agencies, and trustees. Similarly, loan participations involve multiple lenders and servicers. Blockchain technology has already been proven to be an accurate and trustworthy digital representation of the underlying loan, as well as copies of all origination documents, loan documents, and payment history ---all accessible in real-time.

We are seeing today eMortgages, eNotes and the beginnings of smart contracts such as interest rate swaps and caps accompanying electronic legal “documentation.” All of this enhances and benefits from the transformative qualities of Blockchain. In addition to automatic notification of any loan-related event, smart contracts can make automated payments to all loan participants based on the waterfall provisions outlined in the pooling and servicing agreements. We are especially mindful of the legal issues arising out of eMortages and eNotes as well as the custody arrangements of these new forms of legal arrangements. Drafters of the Uniform Commercial Code and policymakers supporting a range of statutes and implementing regulation have begun their work and it’s up to the speakers in this webinar to help participants spot issues and keep up with the evolving law.

Listen as our authoritative panel discusses the architecture of DLT and potential applications of blockchain in the commercial lending context, with a particular focus on MBS and transactions with multiple participants or senior-subordinated structures. The panel will also discuss regulatory and data security concerns with implementing blockchain.

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Outline

  1. DLT and blockchain
  2. Applications
  3. Legal and regulatory issues

Benefits

The panel will review these and other critical issues:

  • What is a distributed ledger, and how does it change the documentation of transactions and information?
  • How can smart contract execution and enforcement be embedded in a distributed ledger or Blockchain?
  • What are the custody issues concerning DLT applications such as virtual currency and how are these currencies custodied in a way that satisfies existing statutory law and regulation?
  • How is an eMortgage and eNote custodied, what is the MERS Registry, and what are the legal issues which need to be addressed in new documentation?
  • What are some of the current and proposed uses for Blockchain in mortgage-backed securities?
  • What legal issues arise with Blockchain that are not present with more conventional formats?

Faculty

Peery, Gordon
Gordon Peery

Partner
Seyfarth Shaw

Mr. Peery is a leader in the firm in providing investment management counsel and is a leading authority worldwide in...  |  Read More

Yiannoulis-Riva, Vasiliki
Vasiliki Yiannoulis-Riva

Partner
WithersWorldwide

Ms. Yiannoulis-Riva's practice primarily focuses on commercial real estate matters, including assisting private and...  |  Read More

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