Banking News

Subprime mortgages to be listed on blockchain

Distressed mortgages

Ranieri Solutions is to partner with financial blockchain firm Symbiont to work on mortgage-based blockchain solutions. Lewis S Ranieri is referred to as the father of securitized mortgage market and came under scrutiny during the subprime mortgage crisis.

In the announcement, Ranieri said: “The mortgage market, despite significant efforts, continues to lag behind from a technological standpoint creating inefficiencies that impact mortgage loans throughout their life cycle”

Symbiont started in 2015 with a focus on capital markets. Mark Smith, Symbiont’s CEO commented: “When Symbiont was founded, it was my dream and vision to develop decentralized technology solutions that could solve the root problems that were at the heart of the financial crisis. Blockchain and smart contract technology is proving to be that solution.”

Both teams have high profile track records.

Ranieri

On March 1st, 2007 Fortune quoted Ranieri in an article about subprime mortgages: “I don’t think this is going to be a cataclysm.” He’d previously earned notoriety in Micheal Lewis’s book “Liar’s Poker” which exposed the exploits of his mortgage desk team at Salomon Brothers in the 80s.

After the crisis, he raised a substantial fund – $825m – to buy delinquent mortgages. He aimed to significantly cut the value of the loan balance, rather than temporarily lower interest payments. The objective was to prevent foreclosures and get homeowners paying. That would mean he could sell stable loans at a profit.

Today his business continues to invest at scale in both commercial and residential distressed debt.

Symbiont

Backers of Symbiont include Duncan Niederauer, former CEO of the New York Stock Exchange.
Several of the founders were behind Bitcoin venture Counterparty which allows for smart contracts to be executed on the Bitcoin blockchain.

Symbionts technology likewise focuses on smart contracts. In this instance, it models any mortgage loan event with smart contracts. Additionally, it creates an immutable record of all mortgage transactions on the private ledger.

The startup’s highest-profile partnership is with fund manager Vanguard that has $4.5 trillion of assets under management. Many funds, Vanguard’s included, rely on market index data. That blockchain solution simplifies the index data sharing process.

Conclusion

Ranieri is one of the most experienced people in the distressed mortgage debt sector. He can bring sheer volume to any new platform.

The vision for any securitized asset on blockchain should be to integrate with the underlying assets. In the case of mortgages that would mean monitoring the payment health of individual mortgages. This enables real-time updates about the quality of the portfolio. That transparency combined with better lending policies could prevent a future crisis.

There’s a related article about a live cat bond blockchain application.

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