A blockchain-based business process to securitise mortgages

Abstract

Today, mortgage originators are under a significant amount of pressure. Following the Basel IV accord, mortgage originators (Dutch banks: ING, ABN, AMRO, and Rabobank) must hold more capital reserves to create a buffer for difficult financial times. Possessing these extra capital reserves comes with the expense of sustaining current economic performance. Off-balance securitisation in combination with blockchain technology can be used to decrease capital on the balance from the originators and thereby cut costs. Furthermore, blockchain and smart contract technology may make it possible to bundle forces in a distributed network and automate the transaction and controlling steps and thus reduce the transaction costs, time, and risks in the securitisation business process. The objective of the study is to help these financial institutions identify and analyse the opportunities of blockchain technologies in the business process of securitising mortgages. This research uses an explorative design approach which employs the information system framework of Hevner et al. to create the first business process model notation (BPMN) model of this business process. This research aims to build a bridge between non-technical and technical decision makers to accelerate blockchain innovation in the mortgage securitisation process. The study is supported by six interviews and four discussions with experts in the field of securitisation and blockchain technology. The viable BPMN model determined that blockchain is able to transform the securitisation industry, but not with a public and permissionless network.