Beyond AI: How Blockchain Could Reinvent the Mortgage Industry

Artificial intelligence may be transforming mortgage lending, but according to Pavan Agarwal, AI is only half the story. In this week’s AI Update, David Lykken and Pavan explore how blockchain could become the other half of the industry’s transformation by bringing greater certainty, transparency, security, and speed to the mortgage process. From tokenized pre-approvals and on-chain records to borrower-controlled data, digital wallets, and the potential disruption of traditional LOS platforms and financial intermediaries, this conversation looks at what mortgage lending could become when AI and blockchain work together. The result may be a future where loan officers have greater control of their relationships and data, consumers have greater ownership of their financial information, and mortgage transactions move more efficiently from pre-approval to closing.

[David] Welcome back, everybody, for another AI update with Pavan Agarwal. Pavan, good to have you here, friend.

[Pavan] Hey, good to be back. I’m wearing my Puerto Rico shirt because I’m finally back at home today.

[David] You’re back at home in Puerto Rico. Yeah. It is beautiful. It is there. It’s beautiful there. It’s summer all the time there. And it’s good to have you back. We are getting a lot of listens on the comments that you are making on this AI update podcasts. AI is taking over. It’s a conversation throughout the industry. It’s the number one. If you put up an AI conference, it’s getting extremely well attended. As you found at A, was it A4? Was that AI four? Yeah, that

[David] Was that was I mean, I mean. One of the best attendants. So it’s really drawing attention. Today I want to talk about an article that Carl Williams wrote in Tech Times. It was published just this week, September 1st. And in the title of the article, listeners, is How Pavan Agarwal is putting blockchain inside of mortgage and property records. Again, real good article. And I really want to draw people’s attention to, you know, Pavan, when we think of blockchain. It’s most associated with cryptocurrency. And you’ve spent years, however, finding a way applying the same technology to mortgage lending and real estate records. And I want to talk about that. So, first of all, break this down for us. Why why is it that you think that we need blockchain in this part of the transaction?

[Pavan] Yeah, correct. So we actually first unveiled this back in 2023. We had a conference with a relative of like 500, 600 people there in Vegas. And it was called Game On. And it’s on our website. I’m sorry. It’s on our YouTube channel. And the way it works, OK. And this is patented technology, which is really interesting because it’s really hard to get a patent on blockchain technology because it’s an open source platform. we already have this fully

[Pavan] Awarded patent. there’s several patents that we have around this. So we didn’t invent the blockchain. certainly didn’t want to. Al Gore invented the internet, and I did not invent the blockchain.

[Pavan] Yeah, right. So the point is that the blockchain is an amazing piece of technology because it is the one single source of truth that all eight billion people on the planet can agree upon. Okay, so that’s the biggest value of the blockchain is like, hey, once it’s on there, no one can dispute it. Okay. And so now how do you use that? So the patents are around how do we use that singular fact that you have this public registry that anyone can access, anyone can add to it, and anyone can read it, and everyone agrees on it? And so what we designed is what we call a true approval and a true token, which converts the whole blockchain into a public auction forum. And that’s where the patents is around, is using the blockchain as a public auction forum. So if you wanted to sell your property, first thing you need is you need a seller, you need a piece of real estate, or could be any property. Let’s just stay real distance. We’re talking to the mortgage industry here. But this patent is broad. It could apply to anything. So you need a seller, you need a property, you need a buyer, and the buyer needs to have cash to buy it. It has to have good funds. And the biggest problem in the whole transaction is, how does a seller get the confidence that the buyer has the money to close? And in this industry, you have pre-approval letters, you know, and pre-qual letters. And they’re only as good as the relationship between the real estate agents on both sides and the relationships with their respective loan officers, right? And so what if we can eliminate the whole need to trust a third party. What if you could see on blockchain that the money is good, that the money guaranteed, right? And so what if the seller can see for sure this money is good and the seller can know for sure that this buyer hasn’t made multiple offers? I mean, you trust the real estate process, you trust real estate agents, right? And what if the buyer can know for sure that the seller hasn’t accepted multiple offers and is then playing the field, right? You need to make sure the seller isn’t playing the field, you need make sure the buyer isn’t playing the field. The seller needs make sure the buyer has the money, right? And the buyer needs to make sure the seller has clear title. But that’s, with title insurance, that’s not so much of a problem. I’ve never, maybe once in 45 years, seen a deal fall apart because the seller’s title wasn’t, the seller didn’t actually own the property he was selling. That doesn’t happen. So, if it does, David, I have a bridge in New York I can sell you.

[David] Exactly. But one of the things that’s really intriguing about blockchain, it confirms like the things you’re talking about there, but also the property transaction passes through multiple organizations. And so there’s the county records and keeping track of the title. Blockchain, I was just reading an article about title fraud, where someone, especially the number of homes, increasing number of homes are owned free and clear. And someone can go in if you own your home free and clear. And basically for very little money, file a document and with your forged signature and indicating you sold it to someone else. So the title fraud, someone could steal your home from you by recording document. Now there’s insurances against that, but when you look at blockchain, that’s a solution to that problem as well, isn’t it?

[Pavan] Yeah, yes. Yeah, that’s the solution. Some of them, fraud is fraud, right? Because if someone has a fraudulent deed with a fake notary and fake signature, the blockchain is not going to solve that. Because if the county accepts it, wherever it’s recorded, it’s recorded, right? Whether it’s recorded on blockchain or recorded in the county records. there’s limits to how much that can be stopped with. Now it can be solved. Ultimately, what the industry is working, the blockchain industry is working towards is for every one of us having our unique KYC token. Like, you human? you? Yeah.

[Pavan] And this is going to require legislation to actually be implemented and several, I’ve been working with organizations across several states. It’s happening right now at the state level, but we need the federal government to chime in. And I don’t know if the Clarity Act addresses this. I don’t think it does. So imagine right now, whenever you buy something, you use your credit card on a website to, buy an airplane ticket, right? And you put in your credit card information. The airline doesn’t know, is it David Lykken that’s actually buying it, or is someone who’s gotten a hold of David’s credit card? Okay, but if you had a cryptographic token that was yours, right, and then you dropped your token in, then the credit card company would know for sure it was David Lykken who bought that ticket, not somebody else, right? And obviously for you to have your cryptographic token, it requires you to keep it secure, right? You just, if you have one token and then that token unlocks everything else, right? So you gotta keep your cryptographic token secure. So you do KYC once means know your customer as a bank process to say, hey, I’m David Lykken and this is my social security number, blah, blah, and I’m not a terrorist and I’m a good guy. All the stuff a bank puts you through to make sure that before they do a financial transaction with David, all the same validations need to, it should only happen once in your life and that’s it. And once it happens once, it should be going to a token. And then all you have to do is keep that token safe. But that requires banking regulations and the act of Congress too. I mean the technology is here, the legal framework is not here. So I digress, it’s a different story. So once you have a KYC token, if each individual has a KYC token, then the ability for a fake notary fraudulent or nobody fraudulent signature disappears because then your D transfer would have to happen with your KYC token only you know it. And so no one will be able to intercept and put a fake execution on it.

[David] Yeah, even even though they could record it separate from the county. I mean I mean they could could record it with the county. But

[David] Yeah, that’s what I’m saying. That’s what I’m trying to say. What is the chances of that happening? Are you are you there’s there’s certainly so many counties are so backlogged and there’s so many issues with our current process that have got to be addressed.

[Pavan] JP Morgan and the other big banks, the money side of banks have announced they’re going to issue their own stablecoins. So they’re jumped on board on this stable coin and blockchain bandwagon. Right. So they were the biggest. The biggest hurdles against blockchain has been the money center banks. They’re the ones who been lobbying against it. And so if they’re if they’re jumping on board, that means, you know, hopefully the rest of this follows through. OK, so this is not going to happen unless like really happened in big way, unless it comes from the federal government. It’s got to come from the top and go down. And if the registry is put in place, if the standards put in place, I mean, look, if we were able to do MERS, which was an industry consortium, then we can do this. it would be a matter of, the simplest way I think would be to do it would be for MERS to move on to blockchain and put in the protocols for all these consumer transactions to be on the MERS platform. That would be the ideal, and then that would put pressure on the counties to move on to that, right? Because it’ll save them money, you know? They don’t have to maintain all the stuff anymore in all this process, right? And they could just pop into this platform. But that gets to a sensitive area then when you start talking about downsizing counties and saving money.

[David] Yeah, that government downsizing is seems like a fantasy, but we’ve seen some evidence in DC. I said Trump is actually pulling this off. Let’s talk a little bit about what it takes to get set up using blockchain. I’m thinking of all the lenders listening to this podcast, listening to this. I mean, we talk theory, we talk about what could be now. Let’s get practical. Number one, how can they do that? And what are the benefits for them to do that?

[Pavan] Ooh. Well, I mean, look, unless you have the platform. Unless, I mean, you have to have a vision in the platform to do it under, right? So

[Pavan] Yeah, exactly. With Angel AI, you can do it with Angel AI. And you know, like if Merge, for example, if Merge, and they’ve talked about this before that they’re go down this path. And if they actually start pushing this and making that happen, it’ll be transparent to lenders. You also interact with the merge the way you always do. Nothing is going to change for you. But the question really becomes you as a lender. First, let’s talk about why you as a lender should do it. What’s in it for you as a lender? what if, like, OK, what does a lender. First, let me back up. What does a lender really sell? When a lender’s loan officer issues a pre-qual letter with the lender’s name on it, you’re selling trust. Because if the realtor doesn’t believe that pre-qual letter, then it’s not going to be accepted. So if you can issue a pre-qual letter, a pre-approval, that you stand behind, okay, and then you take it one step further and you say, let’s put that pre-approval, I stand behind it so much, let’s put that on blockchain so it’s public and everyone can see it. Okay.

[David] Or you can show it to whom you want to, I guess, is the further a consumer standpoint.

[Pavan] Yeah, I mean, obviously there’s privacy issues there, but as far as, I can’t imagine a consumer not wanting people to see it, right? It’s something consumers want because they want the transaction done. So from Lenders perspective, instead of issuing a pre-qual letter that then has to be taken to Realtor and Realtor and Seller and Seller, right? It’s got to go slowly through the process. What if you can issue a pre-approval, tokenize that, put it on chain now, everyone can see it. And so now that way the buyer, walks into an open house and he just shows them his token and is like, it’s on chain, you can see it for yourself. You’ve eliminated the whole risk of, this transaction gonna close? Money is locked in. It’s not just a pre-approval. It’s locked in. If your property is what you say it is and it passes inspection, if your property passes inspection and title, money’s locked in.

[David] So blockchain starts creating greater certainty is what I’m hearing you say.

[Pavan] Right, it’s all about certainty. So it’s about certainty and speed. On the same side, the seller can tokenize his title, basically his title insurance. If you tokenize his ownership of the property and the inspection, can be tokenized, so to speak. The repairs have been, you know, has been reviewed for foundation and repairs and all these kinds of things. And so it was reviewed once, it’s tokenized, it’s public. So now the buyer knows what he’s buying. All the seller disclosures are tokenized. And then it becomes just a trade, electronic trading. It becomes electronic trading platform, the whole blockchain. And that’s what we’re pushing towards. So the first step, but the most important thing is that get that borrower an approval token. Okay, so when the borrower’s issued the approval token, right, it’s immutable and it’s forever. And no one has to question it. Okay, so I deliver you an approval token. So let’s say I’m buying your house, David. I deliver you an approval token and you say, okay, this is money good. Here’s the deed to my house. It’s done. You shouldn’t have to do any more than that. And that’s the future.

[David] Yeah. We’re seeing so many new future futures. I mean, the way we go about future processes we’ve never seen before as a result of these technologies, Pavan. there’s not a lot of lenders that are really working with blockchain the way you are at this point. I mean it’s just it’s…

[Pavan] I’m not aware of any lenders. Even in the blockchain community, have lost their perspective on what Satoshi wanted to do with it. The idea was an open ledger, or the idea wasn’t to create money out of it. It became cryptocurrency. The idea was it’s a mathematical question of how do I have a public ledger anyone can update but maintain integrity. That was the idea. So when you go back again, and we talk about this all the time, you go back to first principles. It’s like, why was this technology created? What’s the purpose of this technology? And once you understand the purpose, then you say, that’s pretty cool. How do I use it? And this is why we came up with the idea of using it as a trading and bidding platform. In the world, you create all these intermediaries that have been created, escrow agents, custodians, clearing agents, bond clearing agents, and so forth. They’ve all been created because somehow the industry, we’ve all agreed to that, okay, Bank of New York, we agree that Bank of New York is the custodian. We can all trust Bank of New York.

[Pavan] But why should we have to trust Bank of New York? If we could do it electronically and do it with technology, we can eliminate Bank of New York out of that equation. Sorry, Bank of New York, don’t mean to pick on you.

[David] That do you think that that’s why there’s legacy systems like Boney, Bank of New York, that are standing in the way of this happening and more progress being made?

[Pavan] Yeah, I think this is a big threat. The whole stablecoin, the Clarity Act is a huge threat to the banking system because that means in your angel wallet, right? So inside Angel AI there’s an angel wallet, which is your crypto blockchain wallet. You can manage all of your assets in there. And theoretically, you don’t need a wealth manager anymore. You don’t need a bank anymore. You can decide how much of it you want it in bonds, how much everybody wanted in real estate and stocks and whatever and cash and money markets and so forth. And the future is like you just, you control yourself in your own wallet and you manage your own portfolio. And what does that do? That disintermediates all these wealth managers and banks and so forth. they have the, basically the whole thing is you pay us two points and we’ll do it for you because whatever, because we’re smarter or whatever. I mean, yeah, but you’re taking two points. You’re taking two points whether or not you did it right or wrong. You get two points flat. Whether you make money or lose money, they’re going to get their two points. It’s such a scam.

[David] Well, they I mean, they got so discredited because of how they rated the mortgage backed securities media.

[Pavan] Yeah, you know, the point of the rating agency is an underwriter, right? And the point of the rating agency is to say that the collateral that’s in the pool is what you said it is, right?

[Pavan] So like, we’re doing a lot of work with non-cumeration and we don’t need rating agencies. Because the people who are investing the money into our non-QM,

[Pavan] Trust, all they want to see is the AI certificate. They want to see that the loans were underwritten and closed by the AI, because they know they’re to get consistency there. They’re to get exactly what they, right? If the AI cert is there, for them it’s better, for the modern investor, that’s better than a rating agency.

[Pavan] Because that means the loan has, rating agency can only sample whatever, 1% or .1 % of a pool. And then based on that, come back and say, yeah, this is accurate or not. The AI has looked at every single loan, every single document.

[David] Yeah. We have so many there’s wonderful developments and you’re at the center of it, especially with the patents that you have. How many patents do you have now? And you how many are pending?

[David] Wow, that’s a lot of patents, especially in one small area. So people gotta learn more. I encourage people to go to your website, Pavan, because there’s so much there. And that’s angelai.com. And it’s just a proliferate and it’s just growing exponentially almost every day.

[Pavan] Yes. There’s so many apps that are in there. Even I can’t keep up with it now. Because now it’s like the AI generates the code now. We’re coming up with stuff so rapidly all the time. for example, going back to blockchain here, one of the questions he asked is, how does a lender use this Well, the advantage that it gives to loan officers is they own their data and it’s theirs. No one can take it. So they go from company to company as their data. Obviously, the companies that they work with have to agree to that. But how can they say no to it? These are self-source leads, self-source data. And it should be in your own wallet. This is your clients.

[Pavan] So what it does, transforms the, it really truly makes that loan officer an independent business. It gives them all the control and power because it’s like you don’t need anything other than your smartphone and all your activities in your wallet, okay, on chain, right? It’s a blockchain wallet, it’s in your wallet, okay, and you only have the keys to the wallet, nobody else, right? and all your loans, all your loan documents, everything is secure in there. And you don’t have to worry about any of the privacy and security issues because it’s all encrypted and locked down.

[David] Right. Now there’s some wonderful advancements. It’s contributing. I encourage people to read the article. We’re going to put a post this article, Pavan, in this interview. And I’ll continue to make people aware to the best of my ability of the developments. We talk about the article there about servicing and Fannie, Freddie, Ginnie Mae, USDA, the security of how does this change up servicing? Let’s wrap it up with that. Other than the servicing can be done at such a much more affordable, your cost of service a loan so much more.

[Pavan] Yeah, right. I was just thinking about the impact of blockchain on servicing. Yeah, so the most important thing is that every one of our customers is now getting an angel wallet. Every one of our loan servicing clients. And their entire loan records, their entire loan history will be in their angel wallet on chain. OK, all right, so all their activity, all their communications. And now you can use Angel AI to generate your will. You could use Angel AI to generate your taxes. And all that’s going into your Angel Wallet. So for a consumer perspective, it’s like that Angel Wallet becomes your whole financial life, from their insurance, from their, even medical, right? I mean, you had an interview with Damon last year, right? So we’re working on integrating the angel wallet to CT scan machines and other medical record devices so that it becomes a central source for you as an individual. Everything’s on chain and in one single place. Okay, so.

[David] Yeah. What I really remember that from that what stood out from that interview with Damon was the fact that, you know, you should own your data. You should you there’s a whole economic, there’s a whole business model now that’s saying you’re gonna be able to own if you own all the data in a blockchain, you’re gonna be able to sell that data as you wish rather than having you be marketed now by the Googles of the World. It’s a fascinating new world we’re entering into.

[Pavan] Yeah, exactly. it’s like, know, loan servicers have not made it easy for their customers to have control and ownership of the data. And part of it is, you know, they want the customers coming back independent on them. Okay, and that goes against everything that we, our philosophy, we say nothing’s beyond reach and that nothing is beyond reach only when you have the tools and when you have your own information. If you don’t control your own information, then nothing’s beyond reach for somebody else, not for you. So we want our customers to own and have their data and control the data, that’s our value proposition. That way you control your life.

[David] When you do that, we have a new world and it’s getting exciting. Courage. We’ll put a link listeners in the show profile of the interview we did with Pavan and Dave and it’s a fascinating interview and the changes. So this is going multivertical, new across many vertical chains. So Pavan, thanks so much for taking time.

[Pavan] Right. So the ultimate nail in the coffin for those is is if the data for those systems is on chain and in your wallet. There’s no need for those systems anymore.

[Pavan] Yes, right. that’s the Wall Street Journal article. talked about it missed one big chunk of this, which is blockchain. They talked about how AI is making traditional software systems irrelevant because what took years to build can be generated in a couple of hours. But that’s only half the problem. That’s only half the solution. AI is only half the solution. The other half the solution is blockchain. OK, so use AI to create some cool software, but where’s the data going? You still need to host the data someplace. But now imagine instead now you plug into the angel wallet and your data is now in your wallet. So for a loan officer using angel AI, and we release the whole released this capability this month where all of your activity with Angel AI, all the way from your loan originations, the documents you collect, the funding and everything, all of that is going straight into the Angel wallet and you have the keys to it. Then the loan officer, who is the king in this business? Let’s face it, that’s the business. This is the business of loan officers because they’re independent business people. And so they will have, they, they, they always have the choice. Okay. So if you’re a loan officer, are you going to be enslaved to the corporate LOS system? That’s a strong word I use there, but are you going to be enslaved to the corporate LOS system where you have no control? Or… Are you going to use an AI that, first of all, makes your life super easy because it just does everything for you. And second, it saves everything on chain into your wallet. And it’s and it’s yours because it’s your client, your relationships, you spend a lifetime building and sourcing. Is there your clients? Let’s just face it. Right. And your clients in your wallet. That’s your book of business. Just like an insurance agent, I mean, I don’t know what is wrong with this industry. And an insurance agent, every insurance company knows that the insurance agent’s clients are their clients. They get the renewals, right?

[David] What are some of the things that we should be looking forward to in some updates we’ve got coming up? Tell us some of the things you’re working on that we can look forward to bringing to our listeners and upcoming.

[Pavan] Wow. OK. I just talked about basically every loan officer having their own LOS and complete freedom and independence and being completely on blockchain. Obviously, Angel agents is the huge thing. You saw the announcement. We’ve already talked about it. And there’s a million features coming on angel agents, one of the very popular things is like we did integration with lead engines. Okay. And people spend points. Okay. So here’s what happens. People spend maybe a thousand points and they get a whole bunch of leads. And then they drive those leads through the call center, the Angel AI call center. And those leads generate apps. And every time you generate an app through the system, you get like 5,000 points. So it’s like a self-fulfilling machine. You invest a little bit, but that gives you business. So it’s going to make you cash because it’s going to give you business. And then it also gives you points. And now you have more points. Now you can go buy more leads. You see how this continues. It’s a virtuous cycle. Right, it’s capitalism at its best.

[Pavan] The more you work, the more creative you are, the more you hustle, right, the more money, you’re gonna get richer and you’re gonna have a lot of points and that’s gonna enable you to get richer.

[David] It is an exciting new world. And the what the outcome will be for so many of our loan officers out there is they’re gonna be able to produce so if they want to and if they’re good, they’re gonna be able to produce so many more, like 10x the loan volume that they have 100x at some point in the future. And that sounds ridiculous to suggest in our current work environment, but it is distinctly possible. And you’ll have all these agents, which we talked about last week. Listeners, I encourage you to go back and listen to all these A updates. There’s a lot of great content. The world is changing rapidly around us. Pavan, always so good to have you be here. Appreciate you stepping away from your busy day and joining us on the microphone.

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Pavan Agarwal is a renowned leader in the mortgage lending industry and a pioneer in bringing artificial intelligence to the financial markets. Agarwal serves as the President and CEO of Sun West Mortgage Company and Celligence International, LLC.