Start-up aims to disrupt mortgage industry
A group of Bermudian entrepreneurs has launched a financial technology company that aims to offer mortgages backed by crowdfunding capital on a global scale.
Bermudian-based Viva Network Holdings Ltd said its “comprehensive borderless mortgage products platform”, which features blockchain technology, has the potential to disrupt the traditional mortgage industry by addressing some of its inherent inefficiencies.
Three Bermudians — Nick Thomson, Christian Fiddick and William Lewis — came up with the concept about two years ago. As the idea has developed, the team behind Viva has expanded to almost 30, some based in Bermuda and others from London to California.
Mr Thomson, Viva's chief executive officer, who launched the company last year and has built a team to work towards realising its vision, said: “We have a very qualified team, consisting of many Bermudians and many other software engineers and financial system developers, including artificial intelligence specialists.”
Mr Fiddick is Viva's chief architect and Mr Lewis is a director.
Mr Thomson sees the platform as “cutting out the middlemen” with great potential benefits for small investors looking for steady income from a collateralised investment, and for borrowers who can access lower mortgage rates.
“We intend for this system to operate irrespective of borders, which can have the potential to drastically affect global mortgage rates and open huge opportunities for international interest rate arbitrage investments,” Mr Thomson added.
At its centrepiece, the Viva platform features a smart contract-enabled fractionalised mortgage shares innovation, which allows for investors to crowdfund mortgages across national borders.
Viva explains: “The crowdlending transactions are conducted utilising the newly released ‘VIVA' token, a blockchain-powered transfer vehicle, while the ultimate delivery of loans and mortgage repayments will be made in each party's local fiat currency.
“Neither the borrower or the lender will require any knowledge of blockchain technology; they will need only use Viva Networks' intuitive web platform. Importantly, neither party will be exposed to cryptocurrency fluctuation risk.”
Mr Thomson, who is also the owner of Scooter Mart, said he had already received some “compelling investment offers” in the few days since the start-up's initial press release on some technology websites less than a week ago.
“Without going into the particular technical details, there is fundamental problem that we believe we can solve,” Mr Thomson said.
“Around the world there are many countries in which their mortgage rates are derived, at least in part by inefficient local financial systems, rather than what they should be derived from — being the net risk associated with the investment, including macroeconomic risk, inflation risk, market risk, default risk, etc.
“Financial systems are now global and value can now, more than ever, be transferred across national borders with ease, so why are there still many nations with highly inefficient lending environments?
“Case in point: why are Bermuda mortgage rates often upward of 5 to 6 per cent, when in many higher net risk nations around the world, the mortgage rates are sub 4 per cent?
“The answer is, in part, market inefficiency — insufficient competition in the mortgage lending industry which, by economic theory and in reality, leads to higher rates.
“Where there is inefficiency, there is opportunity, and we set out to compile a team with the mission being to develop an alternative financing system that can introduce the free market, and eliminate many of these inefficiencies on a global scale.”
Mr Thomson said Viva would create opportunities for smaller, individual investors to benefit from a steady income stream that asset-backed mortgage investments provide. The conventional mortgage-backed securities market is prohibitively expensive for the smaller investor, he added.
“We believe there are many investors, perhaps most, who would be very interested in including these collateralised, and often very safe 5 to 6 per cent fixed returns in their portfolios, but there simply has not been a viable method or system for investors to participate in these returns without the interference of high fees and unreasonable margin retentions by a multitude of ‘middlemen' in-between the homebuyer and the investor,” Mr Thomson said.
The Viva platform divides the principal of a home loan into fractionalised mortgage shares (FMS) and represents these fractions using the immutable smart-contract protocol of blockchain. Investors can then purchase FMS and own them in their Viva Network account.
Lenders will be able to participate in the initial funding of a mortgage, as well as to buy and sell FMS on the Viva's FMS Exchange, a secondary market for FMS.
Viva also plans to offer related services such as blockchain-based home valuations, based on its RV2 valuation product and decentralised credit assessments using its V-Score product.
The company is welcoming early backers, who can contribute, using the cryptocurrency ethereum and in exchange receive VIVA tokens via a smart contract. Its Token Generation Event registration is open and accessible through its website, http://www.vivanetwork.org.
“The VIVA token will be incorporated into all of our systems and applications as a utility token, it will be required to obtain home valuations, participate in fractionalised mortgage shares and the other novel applications that we will develop going forward,” Mr Thomson said.
“It is important to note that VIVA tokens are not investments or securities, and they are also not fractionalised mortgage shares.”
The company aims to start the incremental launch of the Viva Network platform by early next year and has a target date of the second quarter of 2019 for crowdfunding its first home loan.
Mr Thomson added that Viva was seeking support from experienced professionals in Bermuda, who are interested in the start-up's model and vision.
Those who have provided some early advice include James Anfossi, a risk modeller; Gilbert Darrell, the founder of Horizon Communications Ltd and an IT entrepreneur; Stephen Thomson, Nick's father, entrepreneur and real-estate developer; and Stephen Mayor, a business analyst.
“All feedback is very welcome, and support from our community would really help us make a difference and, hopefully, have a meaningful impact on the world,” Mr Thomson said.
“Our vision is to incorporate the free market and improve the current and outdated system. We believe we can help regular people around the world to be able to afford a home, where they may not have been able to otherwise.”
• For more information, visit Viva's website at http://www.vivanetwork.org