Startup Review: SafeChain
SafeChain is a blockchain solution that eliminates title fraud in the real estate market through an efficient title processing program. The main product for SafeChain is known as SafeWire. SafeWire uses multiple sources of authentication to help title agents eliminate wire fraud and keep their customers’ funds safe. SafeWire offers a multi-layered fraud management solution that will minimize fraud losses and operational costs while maximizing revenue for title companies.
SafeWire will verify bank account ownership of every buyer and seller in a title agent’s property transactions, instantly. Title agents can avoid the ever-growing threat of fraud and have peace of mind that they are sending and receiving funds from the correct clients with the Company’s secure wire instruction protocols. SafeWire requires clients of title agents to prove their identity through the Company’s multi-factor authentication so agents can complete their property transactions faster and more securely. Title agents can complete closing due diligence faster while saving staff time and money by implementing our title software in your office.
SafeWire sends title agents’ clients a secure request to verify their information. Then, those clients enter their information in just minutes from any device. From this information, SafeWire detects fraudulent behavior and alerts the staff of title agents instantly. These staff members receive a notification showing the clients verified information and can then automatically qualify transactions with SafeChain verified information.
SafeWire offers a wire fraud guarantee of up to $1 million and works on any banking platform. The software design is easy to use and efficient and also integrates with any current title software. SafeWire also has a dedicated customer support team.
SafeChain utilizes blockchain to create and enhance its products. Blockchain is a digitized, distributed ledger that immutably records and shares information- orders, payments, and account tracking, every transaction retains a secure source of proof reducing fraud, abuse, and manipulation of transactions. Allowing title companies to transact property data over the blockchain allows freedom from current infrastructure, eliminating inefficiencies related to time and resources.
The blockchain enables near real time settlement of transactions. Cryptographic proof allows any two parties to transact directly. The peer-to-peer distributed network records a history and source of proof of all transaction details automatically. Risk of double spending, abuse, and transaction manipulation is mitigated. This reduces paper processes, speeding up transaction times.
In other words, blockchain is nearly impenetrable to fraud. Because a blockchain is a decentralized, public ledger. Transactions are recorded to this ledger by thousands of computers across the world in a shared database, with each user holding a continuously updated copy of the entire history of all transactions. Every item added to the ledger, such as a bitcoin or a property title, comes with a digital signature, like a fingerprint log-in for a smartphone. Only the person with the right digital signature can transfer control of an asset to another person. These signatures are encrypted and validated by all the computers part of the blockchain network, dramatically reducing the potential for fraud.
Property transactions and payer authentication are complex, time consuming, and resource intensive with detrimental consequences when incidents occur. Title Fraud is when the title (ownership) of the property is tampered with, through fraudulent activity. The con artist uses these means to either sell the property or take out a mortgage on the property as if they were the rightful owner. In this case, the true owner may not be aware until someone either shows up claiming the property now belongs to them or they become aware that a new mortgage was taken out on their property through collection calls or notices.
Both forms of house stealing (or title fraud) are typically intertwined with mortgage fraud. And because of the process, mortgage fraud usually has multiple conspirators carrying out the scam. An example of this is the 2013-2014 sentencing of at least five co-conspirators (including a title company manager and mortgage broker). These criminals perpetrated a complex multi-million-dollar mortgage fraud scheme that occurred in Maryland. One conspirator sold homes that did not belong to her. According to an FBI report, house stealing is difficult to prevent. In the past year, $1.6 Billion of total loses were from real estate fraud. Wire fraud has been committed in all 50 states and there was a 480% increase in fraud attacks in the past year.
In order to try and remedy title fraud, a homeowner would probably need a good lawyer and a ton of time to search land records in various government institutions. A problem with searching land records is that it is not always definitive. Of course, accuracy depends on those who prepare and file the documents with the county. Common issues that are found in title searches are misspelled names and aliases. Deeds and other related documents (such as quit claim deeds and mortgage satisfaction letters) are not always filed timely, or sometimes not at all.
One of the consequences of the risk of title fraud is the need for title insurance. This is done to protect the homeowner and the mortgage lender if ownership of the property is ever challenged. Shopping around for title insurance is rare; most people buy the insurance from a title agent referred to them by the loan officer or someone else involved in the transaction. All of which makes buyers of title insurance sitting ducks for abuse. The 2010 Dodd-Frank law called for cleaning up title insurance, and, in 2014, regulators from the Consumer Financial Protection Bureau issued a rule to carry out the law. Basically, the rule created a safe harbor from liability for regulatory violations, but only for loans with closing costs of less than 3 percent of the total loan, including fees to title companies affiliated with lenders. In effect, the rule uses market incentives to limit title costs by offering lighter regulation in exchange for keeping costs down. However, this regulation hasn’t been super effective and title insurance is still very expensive.
E-recording of title transfers is continuing to gain converts. By October 2016, Simplifile, an e-recording network, reported that it had contracted with 1,496 title jurisdictions across 28 states. The company says it covers more than 75 percent of the U.S. population. “More and more jurisdictions sign on to e-recording every day,” Paul Clifford, president of Simplifile, told National Mortgage News. Clifford said manual document recording is set to become the exception, not the rule, nationally “in the very near future.”
The title industry is highly dependent on real estate markets, which, in turn, are highly sensitive to mortgage interest rates and the overall economic well-being. During the housing bubble from 2000 through 2006, the industry's revenue more than doubled. As the surge in real estate transactions drove up title insurance revenue—along with a greater incidence of claims—the economic downturn that started in 2007 pared back revenue significantly for several years. To compare, the industry reported nearly $17 billion in title insurance premiums in 2005, but volume fell to $9.6 billion in 2009.
In 2012, according to ALTA, the industry paid out about $908 million in claims, about 8.1% percent of the $11.2 billion taken in as premiums. By comparison, the boiler insurance industry, which like title insurance requires an emphasis on inspections and risk analysis, pays 25% of its premiums in claims. As mentioned above, professionals in the land title industry seek to prevent claims through up-front preventive measures before a policy is issued and therefore the industry's claims ratio is different from other lines of insurance.
Goldman Sachs estimates that blockchain could reduce the average title premium by about 30 percent by driving at least $2 billion in cost savings for title insurers due to reductions in headcount and insurance claim losses. This would imply that a company like SafeChain could take at least a piece of that $2 billion. At this time it is tough to say what the actual market size would be, but it’s clear that it could be at least north of a billion dollars.
At this time, SafeChain has raised $100,000 from Rev1 Ventures and FinTech71.
Rev1 Ventures With the capital of a VC and the connections of an accelerator, Rev1 supports start-ups through the first phases of growth to increase their probability of success. Their team of experts leads an ongoing, data-driven process that ensures entrepreneurs develop products people want, and companies people need. Rev1 manages a continuum of investment funds made possible by the participation of Ohio Third Frontier and other strategic partners. Rev1 has made almost 200 investments and has led 44 of those investments. At this time, Rev1 has approximately $65 million in assets under management. Rev1 targets a broad range of high-growth tech startups, including IT and health IT, biosciences, advanced materials, agribusiness, and advanced and alternative energy.
Fintech71 is a startup accelerator that provides fintech startups with funding up to $100k, access to the top financial service companies and mentors in the industry. The 10-week intensive program is an Ohio state-wide collaborative ecosystem and innovation outpost for the top financial services companies in the state. Partner Companies Include: Key Corp, Grange Insurance, Huntington, Accenture and Visa
· Tony Franco: CEO -
· Robert Zwink: COO
· Chris Sauerzopf: CRO