Rocktop Digital aims to cut inefficiencies in mortgage asset trading

Earlier this week, Rocktop Technologies announced the formation of Rocktop Digital, a new business focused on digitizing and tokenizing mortgage and private credit assets. As part of the launch, Brett Benson was promoted to CEO of Rocktop Digital.

Benson, the former co-president of Rocktop Technologies, is stepping into his new role with the mindset that the next phase of mortgage innovation may not be about better loans, but better infrastructure.

Just days after the announcement, Benson sat down with HousingWire to outline how the new business is designed to rebuild the “plumbing” of the market, targeting the systems that govern how assets move rather than the assets themselves.

Editor’s note: This interview has been edited for length and clarity

Sarah Wolak: First, congratulations on the new role. You previously held a role at Rocktop Technologies, so what has the transition been like to CEO of Rocktop Digital?

Brett Benson: Just for background context, I kind of grew up on the trade desk. I started my career on the capital markets side. I worked at some big data companies for a period of time, both CoreLogic and Black Knight. For the last 11 years, I’ve been president and chief investment officer at Rocktop Technologies.

The transition here is a little bit of a fork. Rocktop Technologies is focused on some of the generative AI applications and data and documents, as well as automating some of the processes attached to default servicing and some of the trade operational pieces and capital markets.

For me, this is a little bit more of an infrastructure play. We’re more focused on the rails and kind of working on the plumbing of the industry, if you will, so things that would move assets and make the portability and transferability of assets more efficient. That becomes the Rocktop Digital play, as opposed to Rocktop Technologies, which is really focused on the asset itself and how to apply newer technologies to make an asset more efficient.

Wolak: You’ve described this as “rebuilding-the-market architecture.” What do you mean by that? Is something fundamentally broken?

Benson: Yeah, I’ll give an analogy first. So, for example, the DTC [Depository Trust Co.] in the ’70s really focused on the digitization of what were equity trades at that point. There were a lot of paper-driven functions, much like the mortgage industry, a lot of inefficiency in the ecosystem in terms of dealing with paper or manual tasks.

The DTC worked toward the digitization of assets and creating a more trusted, validated digital asset. Then, in 1999, the [Depository Trust & Clearing Corp.] created the clearing corporation that allowed for the transfer or trading of those assets.

We think about it the same way: The mortgage industry is 30 to 50 years behind other tradable assets. It’s not dissimilar from those paper-driven functions and manual tasks of, how do you validate an asset?

There are lots of redundant diligence and certification and recertification of the collateral pieces themselves. What we’re trying to do is create a more efficient system — fix the plumbing. How do you fix the rails on which all of this happens? And how do you create a trusted asset, taking into account some of the privacy pieces? Technology is now allowing for that at scale.

Wolak: What else is different now that makes it viable for Rocktop Technologies to have this new business and to go forward with that confidently?

Benson: It’s almost a separate company that we’re running here — you’ll also hear it called the registry. That function is trying to get ahead of how assets are transferred, and I know that you asked why now. … What we’ve found is that technology has reached a point where even manual tasks done by humans can now be done at a much faster rate and a much more proficient rate. We see errors in human calculations and in dealing with manually extracted data from documents.

It’s the combination of AI functions that are allowing for really the smart kind of technical, technological applications that create validation of assets, and then the blockchain pieces allow you to create an auditable record behind that. That’s how you create trust and the ability to move assets faster.

There’s a lot of inefficiency in the system, and the industry is naturally resistant to change. There are a lot of people making money on that inefficiency. … But now the technology is not only becoming faster, it’s also better, and that’s where we feel like costs can be lifted from the system, which ultimately gets passed through to borrowers and investors.

Wolak: You brought up the element of trust here. What are the biggest regulatory or trust-related hurdles?

Benson: Naturally, there are custody functions. MERS has fought for what is, and there’s case law behind, how to create digital assets. That’s one example where the change to a digital representation of ownership and enforceability of an asset has already started to hit a tipping point. The concept isn’t new, but it’s not well-trusted, and I think it hasn’t been easy for the system to adopt this type of thing. 

A low point in my career was when we were trading a set of assets that had eNotes attached, and we actually had to print out the notes themselves so the financing partner would accept them.

But we are seeing movement. Fannie Mae is moving toward acceptance of crypto for down payments. We’re seeing things in the industry that are moving toward a trusted digital infrastructure.

AI functions have changed even in the past quarter. … It’s become the tipping point. One enables the other: When the AI can validate assets, certify them and create trusted layers, then put them on-chain, you create an immutable, auditable asset. When you have a validated, immutable asset that can be consistently updated with validated information, then you have an asset that becomes more tradable.

And frankly, you’re raising the value of the asset because you’re taking out the uncertainty of the asset.

Wolak: Where do you think the largest impact lies: a specific group of borrowers, investors or someone else?

Benson: It’s a great question. The progression starts with operational improvements. When you release inefficiencies and costs from the system, that ultimately gets passed through to the borrower or the investor.

In either case, it’s what we call the “golden rule” — those who have the gold make the rules. So we see a lot of capital markets that will influence this first, which ultimately gets passed through to the borrower.

In terms of who benefits first, it’s probably the operational functions [through Rocktop Technologies
and Rocktop Digital]. The operational functions really sit with the servicers, lenders, and how loans are transferred. These inefficiencies are embedded in servicing costs and processes, especially with rising delinquencies.

We first see the benefits of this tech in operations, then those benefits pass through to borrowers and capital markets. We need the capital markets to push the adoption piece because they are the ones driving the functions. But ultimately, the goal is really to pass it to the borrowers.

Wolak: How do you ensure the “source of truth” is accurate and trustworthy once assets are tokenized?

Benson: There is essentially a game of telephone happening in the industry. You have the lender, third-party document holders, the servicers — and that becomes the source of truth that then passes through to the investors.

Rocktop Technologies is addressing that by going to the source of truth and creating validation layers. How do you ingest both structured data and unstructured data, so data and documents, and create using AI, to marry up or validate all that data? And then you think about how do you create both the transparency and the portability of an asset?

That’s where Rocktop Digital comes in, by creating an asset that moves easily and has validation layers already on top of it in real time. Technology has gotten to a point where we can do this at scale and at a speed that has never been done before, with trust.

Wolak: What operational challenges have you faced in building this?

Benson: We at Rocktop Technologies embraced AI almost 10 years ago. But, again, we live in an industry that has just as much fight against change or lobbying against change. So there are natural adoption hurdles and headwinds against change.

But what we’re seeing now is that the technology is changing so fast and becoming so proficient. There is a mindset change — much like equities decades ago — and there’s a need for adoption of technology to create efficiencies. And it allows more to become accessible. What I mean by that is, we’re seeing the retail side, they’ve never been able to invest in mortgages, but having a trusted, portable asset with transparency and allowing for efficiency actually brings new capital into the game.

So it raises the bar for the institutional investor … while bringing in new capital players to the market, which creates more fluidity and more liquidity.