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May 22, 2020  

Wilmington Pitching Mortgage Blockchain

Wilmington Trust has launched an ambitious effort to create a blockchain-technology tool containing documents for all non-agency mortgages.

The Wilmington Trust Securitization Platform would offer access to information including representations and warranties, underwriting guidelines and servicing parameters. It would span both securitized mortgage pools and whole-loan portfolios, including those for which Wilmington doesn’t serve as trustee.

Research and planning for the effort began two years ago and were gaining momentum prior to the coronavirus crisis, with Wilmington demonstrating a prototype for industry investors, issuers, rating agencies, attorneys and others. The company also showed the technology to Fannie Mae and Freddie Mac for their potential participation.

Now, Wilmington is taking the next step in the process: finding financial partners. “We have a few technology partners who can develop the technology needed, but it’s a high cost,” said Patrick Tadie, a senior vice president who heads Wilmington’s structured-finance division. “So we are seeking a few investors and an issuer, or insurer, or even a GSE, to share the cost of development.”

It’s unclear how much capital Wilmington is seeking. It also has yet to finalize a fee structure for users.

In the years following the 2007-2008 market collapse, there was a massive increase in demand for access to mortgage paperwork as issuers and investors worked through litigation stemming from the crash. But those documents proved difficult to retrieve because they were stored in physical warehouses nationwide, and industry participants have been seeking a solution ever since.

Indeed, many institutional investors have avoided post-crisis securitizations of private-label mortgages out of concern about their abilities to review loan documents. Part of Wilmington’s pitch is that by placing the information on blockchain ledgers, it could offer faster and more reliable access, especially for use by buysiders.

The tool also could eliminate the need for so-called deal agents charged with enforcing investor protections, as users could immediately verify compliance with stated representations and warranties.

Wilmington emphasizes mortgage-related trust work, routinely placing as a leader in league tables published by Asset-Backed Alert. “We see this as an opportunity to help out the market in that technology can quicken how reporting can be done, provide faster, more reliable information to investors,” Tadie said. “And we need some help in developing a working, more expansive product.”