There are rising trust issues within the current US land recording system that present problems when doing a title search and undertaking the settlement process :
1) There are an increasing number of fraud cases that involve bilking money out of buyers who think they are dealing with the true owner of a property. The buyers send money to finalize what they think is for the purchase of a property. Instead, fraudulent deed(s) are filed to transfer the title to the “new owner” by someone other than the owner. This is done without the true owner and new “buyer” knowing about it until after the money has changed hands and the deed(s) are filed.
2) Time delays for registrations of new property so that they appear in the official records when doing a title search can be long depending on what US county you file in; from a few days to a few months or even longer. If a fraudulent deed has been filed it could take months to find it with a title search or even longer if no title search is done. Typically, title searches are only done when purchasing or refinancing a property.
3) Human error plays a role in that all updates to the land record system are done by a person. Depending on how competent & careful that person is determines how vulnerable a county’s official land records are. Blockchain has the potential for putting more trust back into the system. Fraud can be avoided in most cases with BlockChain because all computers in a BlockChain network must affirm any change to BlockChain; something that current land recording system does not have.
Blockchain also has the potential for being much faster to process a transaction than the current manual input system used across the US land recording system. “ParallelChain” a Hong Kong BlockChain startup, has addressed the pain point of speed with its ability to process 100,000 transactions per second (TPS) Their closest competitor is Visa’s BlockChain system that processes 24,000 TPS. “ParallelChain 2.0” is set to be released in mid 2021 with a doubling of speed to 200,000 TPS. This huge increase addresses the pain point of scalability. Scalability is required to make BlockChain something that can eventually bring BlockChain into the mainstream and to attract the huge investment required to make it mass market ready.
ParallelChain addresses the pain point of security with their proprietary “proof-of-immutablity” algorithm they say can prevent attacks that seek to rewrite an immutable (unchanged) BlockChain. ParallelChain has an application called “ChattelChain” that is a trading platform that can handle fractional real estate ownership, fiat (paper) money and cryptocurrencies. They also have “ApprovalChain”; a web based application that streamlines workflow, tracks provenance and makes approval processes transparent with smart contracts and real time image processing.
Addressing the pain points of speed, scalability and security are required to attract the investment needed to bring BlockChain to the title search and settlement mass markets. Being able to handle a settlement with smart contracts and secure currency are also critical. ParallelChain appears to be leading the pack in this regard. The implications for the Title & Settlement Industry are clear. Change is coming.