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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 6 August 2023 M T E C H Justin Lischak Earley, Chief Innovation Underwriter at First American Title, studies the concept of tokenizing real estate assets and has published thought-provoking per- spectives on what is real and what is not in terms of NFTs in real estate. His thought leadership on the topic earned Justin an invite to a recent gathering of top economists, where he presented his in-depth research, "Bear With Me: The Bear- er-Asset Dangers of Tokenizing Real Estate." Justin recapped some of the key points of his presentation. "Some transaction formalities surround- ing this vitally important life event are not a friction ripe for removing; they are safe- guards worth preserving," Earley said. Why are crypto enthusiasts eager to tokenize the real estate industry? It is important to understand what tech- nologists and crypto champions dislike about the existing system. In general, the complaint is that the real estate economy is full of need- less waste and unnecessary red tape. While some companies are making significant progress in creating a simple, fast, and transparent real estate transaction expe- rience, complaints about the traditional pa- per-based nature of real estate are frequent, and many of those are well-founded. The larger issue goes beyond real estate's historical reliance on physical paper documents. It speaks to a perception that the transfer of real estate is filled with unneces- sary rituals that introduce delays and friction into the transaction. The existing real estate system does indeed have rituals and checkpoints that can delay a transaction's consummation, but many of these are there to protect consumers. Why are real estate transactions hard to integrate with "crypto culture"? A faster and more liquid transaction does not necessarily mean a better or more secure transaction—especially when the purchased good involves high-value, non-fungible assets like single-family homes. Which are typically the largest purchase an ordinary person will make in their lifetime. Significant transaction formalities have arisen around real property, and for good rea- son. Blindly removing these guardrails in the name of technological progress could have catastrophic consequences for consumers and the broader real estate economy. For example, the more liquid an asset becomes, the more prone it becomes to fraud and theft. In standard real estate law, there are tripartite deed formalities of execution, delivery, and acceptance. These are error-pre- vention mechanisms that the law has created to help ward off fraudulent, accidental, or otherwise undesired conveyances before they happen. What's so special about these formal- ities? If crypto technology can operate without them, what's the problem? Just because a technology can do some- thing does not mean that it should—espe- cially when there are deep historical reasons why it should not. Should crypto enthusiasts build the "frictionless" system that they en- vision, they would soon find that they would have to rebuild new "friction-inducing" legal rules like those that they just tore down. Rather than suffering through the consumer harm that could arise from this misguided path, we should invest in digi- tizing and modernizing the existing system of real estate transfer. This would offer the same long-standing protections of current real estate law, but with a superior consumer experience that leverages technology in ways recognized to be positive. HIGHLIGHTING SERVICER SUCCESS AND THE UTILIZATION OF LOSS MITIGATION TECHNOLOGY B lack Knight, Inc. has announced the release of a new case study illustrating how self-service technology (SST) deployed by loan servicers during natural di- sasters can improve loss mitigation outcomes. The COVID-19 pandemic significantly impacted the United States and its economy, as the percentage of unemployed Americans quickly spiked to double digits and millions of Americans were in a state of distress because they were laid off or otherwise unable to work. With the passage of the CARES Act and widespread adoption of forbearance options by servicers and borrowers, the potential for a foreclosure crisis to rival, or even eclipse, that of the Great Financial Crisis was largely averted. "When borrowers face periods of financial hardship, they need seamless access to qualified assistance options," said Joe Nackashi, CEO of Black Knight. "The COVID-19 pandemic brought this fact to light