The product that has been built by Figure is a perfect example of the value that can be created when you digitize assets in a thoughtful, compliant manner. Here is a simplified way of describing what they do:
Mortgage transactions have a borrower and a lender. Between those two parties, there are approximately 5-7 middlemen who charge a total of 7-8% fees per transaction. This process is fairly slow and fragmented.
Figure has “automated” the mortgage process by creating software which removes the need for each middleman. The automation of this process also decreases costs to ~5% transaction fees. Customers can now apply for a HELOC and be told within minutes whether they qualify or not and then receive the funds within 5 days.
The automation of the mortgage transaction was previously not possible because each mortgage was either analog (physical paper) or electronic (CUSIPs). Those technologies are not compatible with “automation software,” but the advent of a digital mortgage changed all of that. Since launch, Figure has grown significantly.
The latest public numbers are that Figure is issuing $85 million in loan originations per month. That puts them on more than $1 billion in annualized originations. Not bad for a company that is only ~ 18 months old.
Figure has also built a blockchain-based transaction settlement layer (Provenance) which closely mimics the Depository & Trust Corporation (DTCC). In the traditional financial system, the DTCC settles more than $2 quadrillion of transactions per year. Obviously, that is a lot of transactions!
The Provenance blockchain empowers financial firms to benefit from same day settlement times (DTCC is 2 or 3 days), lower costs, and potentially higher ratings from the rating agencies (see Provenance’s white paper on this here). While many people have promised similar benefits, no one has been able to (1) build the product, (2) get it launched, (3) put material volume through the product, and (4) entice large financial firms to begin moving their assets over.
Figure has successfully done all four of these things. But they aren’t alone. The company announced yesterday that Caliber Home Loans, one of the largest mortgage lenders in the country, has also started to originate, service, and finance mortgages on the Provenance blockchain. Pretty incredible.
DCG HAS NO AFFILIATION WITH FIGURE.