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# System prepended metadata

title: Mortgage protocol

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# Mortgage protocol
The current mortgage system in the US is inefficient, slow and expensive at various levels. We aim to build a blockchain protocol to solve some of the problems in the mortgage industry.

Below is a high level overview of all the steps involved in current mortgage system and our proposal for a new system thought from ground up.

## Process and players in the current mortgage system

1. **Loan origination** - If you want to take out a mortgage loan, you work with a licensed mortgage broker. The mortgage broker parterns with lending banks and finds a loan suitable for you. Mortgage brokers get paid a commission for this work.
2. **Loan application** - You have to apply and submit all the documents to the lending bank to initiate the loan application.
3. **Loan underwriting** - A team of underwriters review your application (takes 3 - 6 months) and approves/reject your loan.
4. **Funds disbursal** - If it is approved, you sign tons of documents and the funds are disbursed to seller.
5. **Record transaction at the county** - All transactions are recorded at the county where the property resides
6. **Title Insurance** - You have to also pay a hefty amount to the Title insurance company who records the transaction and guarantee that no one else owns this property.
7. **Loan securitization by bank** - Lending banks often sell your loan to institutional investors. They can either be sold individually or packaged with other loans and sold. This is a fairly long process. 
8. **Loan servicing** - As you make monthly payments, the amount is sent to the investor who owns your loan.
9. **Refinancing** - Refinancing costs 2% - 3% of the outstanding loan amount and takes a lot of paperwork.

## Process and players in the new mortgage system
Below is how we envision our new protocol would work. In this new system, the lending bank would be a DAO funded by DAO members. The DAO is responsible for issuing loans.
1. **Loan origination** - We will do away with mortgage brokers because anyone can apply for a loan by submitting a proposal to the DAO. This will instantly result in cost savings.
2. **Loan application** - The potential borrower completes the application and uploads all the documents and encrypts with their own private key. This way, the documents are always safe and they can reshare easily (for example if they want to refinance in future).
3. **Loan underwriting** - DAO will elect a group of underwriters to underwrite the loan. These underwriters have to stake money which will get slashed in case of loan default. Underwriters earn commission and reputation on chain.
4. **Funds disbursal** - If the loan is approved, DAO transfers USDC to seller's bank account. At the same time, an NFT representing the loan is minted by the DAO.
5. **Record transaction at the county** - Same as now
6. **Title Insurance** - Instead of paying the title company to record the transfer, the transaction is recorded on chain and it acts as title saving money.
7. **Loan securitization by bank** - The DAO can package NFTs using different criteria via smart contracts and sell to institutional investors. Anyone can bid on these packages and trade.
8. **Loan servicing** - Loan servicing becomes extremely simple because the borrower pays and the payment goes to whoever owns the NFT at any point in the life of the loan.
9. **Refinancing** - With all the details on chain, refinancing becomes a very quick process. You simply have to amend the NFT metadata representing the loan to refinance. This will result in the entire process becoming efficient and less expensive


Overall, we believe this new protocol can make the entire mortgage industry very efficient and provide significant cost benefits to end user and eliminate many middlemen.
