Representation and Warranty Enforcement: Using Blockchain Technology to Improve the Investor Experience

Abstract

Wilmington Trust is proposing to utilize blockchain technology to enhance the process of enforcing the implementation of representations and warranties (R&Ws). In the past, the R&W enforcement process has taken months, if not years, to get to a proposed solution, and even then, there has been much difficulty in getting to an agreement on how best to enforce R&Ws. The blockchain technology will enhance the speed and accuracy of the process, thus solving a problem that has vexed the investor community that buys mortgage products.

By utilizing blockchain technology, Wilmington Trust proposes to do the following:

• 1. Centralize all documentation in one system, including the documents related to R&Ws at time of origination, at time of servicing, and for the life of the servicing, as well as the supporting documents needed to make a decision.

• 2. Speed up identification of issues related to non-compliance with R&Ws.

• 3. Arrive at decision resolutions in days instead of the current months/years-long process that is often accompanied by disagreements, disputes, and lawsuits.

TOPICS: Legal and regulatory issues for structured finance, MBS and residential mortgage loans

Key Findings

• • Enforcement of R&Ws has been a huge, time-consuming, costly, acrimonious, and investor-unfriendly process.

• • Wilmington Trust proposes to utilize blockchain technology to centralize the process, improve the time frames dramatically, and remove the issues listed above.

• • Investors have expressed strong interest, hoping to remove impediments to a more efficient, fair, and balanced process that ensures adherence to the R&Ws of both origination and servicing of loans they purchase.