Mortgage Legend Backs Internet Lead Co.

Lew Ranieri invests in Root Markets

January 30, 2006

By PATRICK CROWLEY

Lew Ranieri, considered the father of mortgage-backed securities, has joined Root Markets, a New York-based online marketing and advertising firm that provides leads on mortgages and other financial services.

Ranieri, who could not be reached to comment, has reportedly invested $5 million of the fortune he made on Wall Street in the Internet startup company.

“As you might know, in the 1980s, as Salomon Brothers’ head of mortgage trading, Ranieri created the trillion dollar mortgage-backed securities market,” Root Markets said in a statement. “Ranieri has teamed with Internet advertising pioneer Seth Goldstein … to create Root Markets, which applies the transparency of a traditional financial exchange … to the emerging market of lead generation.”

Root Markets, which was founded last year, recently purchased Lead Filter, a lead exchange Web site and service for the mortgage industry.

“Lead Filter connects many of the leading lenders to several of the top lead generation sources,” Root Markets said in a statement. “The platform easily allows lenders to test across multiple lead sources and consolidated accounting, while offering analytical tools for optimization of their lead buying programs.”

Root Markets is making its first major foray into the mortgage industry. The company will collect information on consumers that click on to ads, commercial Web site and other places on the Internet.

That will allow the company to bundle leads of people looking to buy or sell a house. Those leads will be sold to mortgage brokers or lenders.

Consumers can also make their information available via Root Markets if they are interested in being contacted by a broker or lender and want to shop around for the best deals.

“By creating a more efficient Internet lead generation marketplace with transparent pricing and explicit consumer permission, Root Markets has an opportunity similar to that which I saw on Wall Street more than 20 years ago in the mortgage market prior to securitization,” Ranieri, who is the company’s executive chairman, said in the statement.

Ranieri, a Brooklyn native and college dropout, was working in the mail room at Salomon Brothers, a Wall Street investment giant, before eventually working his way on to the bond trading desk in the 1970s.

There he pioneered and even coined the term “securitization,” the process of converting home loans into bonds. The bonds pooled thousands of mortgages, spreading the risk while creating a new investment vehicle. Investors made money on the homeowners’ payments.

His exploits were chronicled in Liar’s Poker, an insightful and at times irreverent book that looked into Salomon’s bond trading desk.

“Lewis Ranieri … is generally considered to be the ‘father’ of the securitized mortgage market,” according to The Milken Institute, where Ranieri delivered a speech last year. “Ranieri helped develop the capital markets as a source of funds for housing and commercial real estate, established Salomon’s leadership position in the mortgage-backed securities area and led the effort to obtain federal legislation to support and build the mortgage and capital markets.”

Patrick Crowley is a feature journalist and blogger for MortgageDaily.com. He is also a reporter, blogger and columnist for The Cincinnati Enquirer.
e-mail Patrick at: [email protected]