Mortgages: A Perfect Use for Blockchain

Mish

There are excellent uses for blockchain. Here's one I proposed years ago that is now in media discussion today.

Please consider Blockchain Eyed for Mortgage Bundling That Caused 2008 Crisis.

A group of big financial institutions wants to use the blockchain to help resurrect the packaging of home mortgages into securities, a business that almost destroyed the global banking system in 2008.

Credit Suisse Group AG, U.S. Bancorp, Wells Fargo & Co. and Western Asset Management Co. said Thursday that they successfully tested the distributed ledger technology as a way to make it easier to track securitized home loans.

“Structuring securities is complex, involving many different parties, manual processes, duplicated documents and data in different formats,” David Rutter, chief executive officer of blockchain startup R3, which is organizing the consortium, said in a statement Thursday. While the group is starting with residential mortgages that aren’t backed by the U.S. government, it plans to expand to other types of asset-backed securities. The next step is delivering a commercially viable product, R3 said.

“Distributed ledger technology will increasingly improve security around data, not just for capital markets but across numerous other industries,” Penny Morgan, global securities operations manager at Western Asset Management, said in the statement.

BINGO

Low-volume, high-worth transactions are perfect for blockchain. I proposed Title Insurance applications years ago. The entire Title Insurance industry and car title industry could easily be replaced by blockchain at a huge cost saving.

I expect both to happen.

Arguably Bad Uses

Bitcoin Top In?

Amusing Video

Tatoo This

"Stop saying the blockchain is the underlying technology behind Bitcoin. It's the other way around."

How people can make such clearly false statements with a straight face is beyond me.

Blockchain has many legitimate uses. Bitcoin has a use in money laundering and speculation.

Even if you believe Bitcoin has more uses, fundamentally, Bitcoin depends on blockchain. Blockchain does not depend on Bitcoin.

Mike "Mish" Shedlock

Comments (8)
No. 1-8
Hooligan
Hooligan

You got it Mish, good on ya. Bitcoin is worth whatever the next muppet will pay for it or whichever criminal needs to launder some shiny ones.. Maybe if they converted all the "Linda Green" robo-signed mortgage paper trails they could invent a coin called "Alt-A-Coin". It would immediately be worth around 4 trillion dollars and really make Bitcoin really look like a two-bit coin.

Spiff
Spiff

Any blockchain requires incentives to keep miners mining, so that transactions can be executed as more blocks are added to the chain. That incentive must be enough to keep the hashrate high enough and the mining pool diverse enough to keep any potential block-forgers from being able to afford fielding "50% + 1" of the hashrate.

Bitcoin is the original, most well known, and arguably most successful of those incentives to keep a blockchain alive (i.e. growing and uncorrupted). I'm pretty sure all the other viable blockchains out there also use very-Bitcoin-like cryptocurrency as the incentive to keep the blockchain alive. So although blockchains don't require Bitcoin per se, I don't think anyone has a viable blockchain (i.e. a growing, uncorrupted, public ledger) that doesn't depend on a cryptocurrency.

Hooligan
Hooligan

spiff, isn't it the case that you mine bitcoins in a blockchain bitcoin mine, but that is one of an infinite number of possible blockchains; blockchains can exist for any supply chain or process with many steps?

Blacklisted
Blacklisted

Cherry-picking bad examples of crypto use is as easy and disengenuous as saying the internet is worthless because terrorist use it. There are many good blockchain ideas in RE, just like any industry that has way to many middlemen and inefficiencies.

Just because Bitcoin is the most well known crypto now does not mean it's the best or will even survive. Look at the history of Web search and see how many big names survived - https://www.wordstream.com/articles/internet-search-engines-history. It safe to say that Google was not the first, and the Internet did not die because so many companies failed.

All the nut jobs that keep saying Bitcoin is only for money laundering don't understand that Monero is the preferred crypto in the underground economy. Besides, the money center banks launder far more money than Bitcoin, but I would bet that most of the crypto-haters have their bank accounts and credit cards with JP Morgan Chase, BofA, Wells Fargo, Citi, etc.

JonSellers
JonSellers

I'm not certain how the block chain adds an improvement for MBSs. Fraud on any side still requires resolution by the judicial system. Is the block chain cheaper than storing my contract in a drawer somewhere?

Stuki
Stuki

@Spiff
+1000.
What makes blockchain technology, as employed by Bitcoin, valuable, is that it is a DISTRIBUTED blockchain. Not one under central control. Anyone can mine, no miner nor consortium thereof can monopolize the process, hence everyone can keep everyone else honest, and is incentivized to do so. Structuring a closed ledger, oligopolistically operated by a few well connected too-big-to-fails, to look superficially like the currently hip and hyped “blockchain” to the uncritical; is just more of the same old “selling hype to those too dumb to notice” that destroyed what once was the West.

That’s not to say land titles, and possibly mortgage contracts, cannot efficiently be verified in a distributed fashion. Just that some hyped “blockchain startup,” in cahoots with a “consortium” of well connected and privileged Fed welfare recipients, is hardly likely to be the progenitor of such. Simply because the cheapest way to do the verification, is to route around all of the above. In favor of having it done by some dude with access to spare amperes at a Chinese hydro dam. And any restriction aimed at making the latter unfeasible, will effectively kill off all that is useful about a Bitcoin style blockchain in the first place.

Brother
Brother

How many numbers are on the block chain roulette wheel?


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