The company founded by the “father” of the mortgage-backed securities market has partnered with blockchain startup Symbiont with the aim of shaking up the mortgage industry.
Ranieri Solutions was created by Lewis Ranieri – a former Salomon Brothers bond trader who pioneered the development and use of mortgage-backed securities (MBS) back in the 1970s – and will now work with Symbiont’s smart contracts platform, Assembly.
Ranieri, who declined to be interviewed for this article, said in a statement last week that the mortgage market “continues to lag behind from a technological standpoint creating inefficiencies that impact mortgage loans throughout their lifecycle.”
“By partnering with Symbiont, a proven blockchain pioneer, Ranieri Solutions believes that together we can implement this transformative technology to bring necessary efficiencies, transparency, and security to the mortgage markets,” he went on to say.
Mark Smith, Symbiont’s CEO, said in an interview Friday that the mortgage market “lends itself perfectly to a blockchain solution.”
First, he said, “you’ve got all these disparate participants” – referring to the banks, borrowers, and brokers – along with companies like Fannie Mae, Freddie Mac, that would benefit from doing business across a common network.
He went on to argue that Symbiont’s platform could allow mortgages to be grouped into “very transparent pools that can be securitized.”
And transparency is key. Mortgage-backed securities were blamed for sparking the late-2000’s financial crisis, as the “junk” status of some loans was hidden in large, opaque pools. These pools were given investment-grade ratings, despite the hidden risks.
Indeed, Ranieri was among those blamed for setting the stage for that crisis. Smith said, though, that such practices began long after Ranieri’s involvement in the creation of the MBS.
“This beautiful product that he created was turned into a Frankenstein by others,” he said.
Smith went on to say that he sees the regulatory reaction to the crisis as a mistake – a “big doubling down on centralization” that set the stage for history to repeat itself.
“What should have occurred was a breaking up of that concentration through decentralization. Blockchain and smart contract technology is really the first opportunity to embrace decentralization that provides the same type of efficiency [as] traditional markets,” he told CoinDesk.