Big institutions make the loans because small ones can’t bear the risk. A small investor might only have the capital to make a handful of mortgages, and so have a much higher variance in her outcome. A single default might eat all her return and then some. So the small investor might instead contribute to a much larger pool and earn a lower return with a much lower variance.

We could imagine mediating that transaction through blockchain something something, but degree of risk pooling - centralization - is the essential feature of the transaction