Is there a demand for “mortgages” to buy virtual real estate in the Metaverse? We hope you enjoyed last week’s edition where we talked about Home Prices Moved Up Even Faster in January Despite Higher Rates. This week we’re bringing you:
HousingWire Editor in Chief Sarah Wheeler was able to catch up with Stephanie Durflinger, senior vice president of product strategy at ICE Mortgage Technology, during ICE Experience in Las Vegas. Durflinger shared her key takeaways on the results of ICE’s hybrid eClose return on investment (ROI) study. The study found that ICE’s eClose solution could save lenders up to 70 minutes per loan and cut down the time to close by 2.3 days.
“For lenders, that means they can do more,” Durflinger said. “You can close more quickly, you have less time on your warehouse line, you have borrower satisfaction, your title agents are happy, you’re able to close as many as possible. And it just adds value.”
In addition to time savings, the study found substantial cost savings from adopting eClose, starting with hybrid eClose. “As lenders increase hybrid eClose adoption and adopt Encompass eNotes and eNotary, MarketWise LLC experts project at least $500 in savings per loan, once a full eClose process is implemented,” the study stated. Durflinger highlighted the importance of this cost savings, noting that the cost of origination continues to increase.
Rates have been rising rapidly in 2022 in general as the market quickly repositions for a big shift in Fed policy. The Fed sets short term rates and buys longer term bonds. Both actions impact rates across the board.
In the past 6 months, the Fed simultaneously indicated it would need to hike rates faster AND reduce its bond purchases much more aggressively than the last time it shed bonds from its balance sheet in 2017-2019. There have been several “bumps” along the way since late 2021 where the Fed has essentially given markets a wake-up call about even more aggressive policy tightening.
The most recent bump was from Fed Chair Powell two weeks ago. It resulted in rates spiking to nearly 5%. Last week offered a bit of a lull and markets hoped that rates might finally be leveling off.
The Metaverse is defined as the simulated digital world that mimics the real world through virtual reality and augmented reality in which users can interact. As the Metaverse expands, its offerings now include “virtual” real estate. But what does virtual real estate mean for real-world mortgage professionals?
Defining virtual real estate
“Actual” real estate is defined as property consisting of land or buildings, and everything that is permanently attached to the land. There is a legal description. Its boundaries can be shown on a land survey and ownership is vetted through a physical deed in the jurisdiction, where the physical real estate is located. Ownership grants the right to possess, sell or lease it.
“Virtual” real estate shares much of the same general definitions of actual real estate. In Decentraland or Sandbox, for example, the legal descriptions are individual pixels (essentially code) that define the “parcels.” And, like in the physical world, there is a limit on how many parcels are available. Decentraland, for example, has 90,601 individual 50’ x 50’ parcels. Each parcel is worth real money. Ownership and the rights to purchase, sell or lease are conveyed as Non-Fungible Tokens (NFTs) on the blockchain.
Today, the law is not yet clear on whether or not virtual land in the Metaverse is “actual” real estate. The debate is likely to continue for years to come.
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