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Disrupting the Paradigm for Document Collaboration

Writing on Paper BHMost industries rely on document collaboration to conduct business and finalize transactions. Whether it’s the mortgage industry dealing with clearing title, an accounting firm providing a tax opinion, or a company preparing to go through the acquisition process, due diligence is necessary through current, trustworthy documentation. Yet, with multiple players in different locations involved in business deals—and some types of transactions like mortgages, audits, and M&A activity taking weeks or months to complete—reliable processes for document sharing is challenging.

Here’s a hint: most companies today rely on one of two main models by which stakeholders share documents, but both are flawed. Fortunately, there’s a superior option now available, in the form of blockchain technology. Blockchain offers a disruptive collaboration model by which work groups and teams across diverse industries can store information in a way that everybody trusts is unaltered—without needing to rely on a third-party company or outside entity.

Option 1: Sending the Document Itself.

In this model, someone within the mortgage ecosystem—say the title company—takes a document such as a title commitment out of their system and sends it to someone else who is involved in the transaction—say the lender. The title company sends the title commitment, either by email or a secure file transfer system, taking the document out of their system and sending it to the lender. While almost all businesses operate using this model today, the problem with it is as soon as the recipient has the document, it’s no longer necessarily current. At any point after the act of sending the document a change to the source document could occur, making the recently sent document obsolete.

If you follow the title commitment through the eyes of the lender, they assume the document they have received is current and correct and since they hold the document now in their system they have the benefit of knowing the document itself hasn’t changed. What the lender doesn’t know is whether someone else involved with the transaction—perhaps a different colleague at the title company—has added or updated information in the title system, rendering the lender’s “reliable” document instantly out of date. So, the lender gets the benefit of knowing their document version hasn’t been changed, but it still might be no longer accurate or relevant.

Option 2: Sending a Link to the Document. 

Many businesses are understandably worried about the versioning issue that comes up when using the first model, whereby a document received isn’t necessarily the most current update of the file. For documents that will change frequently due to the nature of the transaction, companies can opt instead to send the other party a link to the document rather than sending the file itself.

The advantage here is that when the lender clicks on the link, they can review the current version of the title commitment right off the title company’s website or server. Any time anyone at the title company updates the file, the lender will always be able to see the most current document via the link.

This sounds great in theory, but the fact is that this second model is as problematic as the first when it comes to trusting the reliability of the information. If the lender opens the file via the link today and works off of it, then closes it and opens it up tomorrow, it might not be the same document tomorrow. With no alert or notification when the document has been altered, the lender has no way of knowing when someone is changing the file at the title company. Choosing either of these models for document collaboration is a bit like building a house on sand. In short, the lender has to select between two bad choices.

Option 3: Blockchain Collaboration

It’s clearly time for a paradigm change in how businesses approach document collaboration. This is particularly true for transactions, like mortgages, that have inherent risk given the necessary continued collaboration of multiple parties over a period of months and years. A breakthrough technology already exists that allows collaborative teams to experience the benefits of each model above without the flaws of either one. That technology is called blockchain. Here’s how it works.

Using a blockchain document validation service, the title company registers its title commitment and shares this document via a blockchain entry. The lender then accesses the document via blockchain document systems. Through the blockchain technology the title company records a digital proof of the document to ensure the document is never altered. The digital proof acts like a digital fingerprint, creating a tamper proof seal on the blockchain. Any changed versions of the document are automatically registered as new version on the blockchain and all parties are notified. Blockchain technology brings an uneditable, virtually unhackable, neutral third party to the collaboration for the added validation, confidence and confidentiality required in sensitive transactions.

About Author: Laurie Pyle

Laurie Pyle is EVP of Factom, a blockchain-as-a-service company that created the mortgage industry’s first practical blockchain technology solution – Factom Harmony. Previously, Pyle was Managing Director at Corsair Associates and worked with technology companies in the mortgage and financial services industry. Prior, she was EVP/CIO for Stewart Lender Services.
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