Photo: Fluidity / Facebook
The blockchain technology has become a reliable ledger that hosts information for many industries including supply chains. Now, on fintech startup called Fluidity plans to launch a project that will log mortgages onto the blockchain network. On Thursday the company announced its schedule to develop the first ethereum-powered mortgages in New York and California.
After all the licensing paperwork is finalized, Fluidity executives said the offering is planned for this summer. The chief architect of Fluidity, Todd Lippiatt, said:
“We’ll tokenize the house, which will effectively take the collateral that is the equity of the house. You’re pledging the house and you get an advanced rate back in terms of dollars.”
When the FINRA-registered broker-dealer Propellr merged with the ConsenSys decentralized exchange (DEX) in early 2019, Fluidity appeared Sam Tabar, Fluidity co-founder, said that although Joe Lubin is still a major AirSwap shareholder, the company’s subsidiary, the parent company has another set of shareholders. Some of the new notable shareholders include Mike Novogratz, Bill Tai, and Brock Pierce.
The startup’s upcoming mortgages are expected to use cryptocurrency and smart contracts for back-end management. Lippiatt said that Fluidity is currently looking for partnerships with ethereum-centric lending platforms like MakerDAO’s dollar-pegged DAI loans.
Currently, the ethereum-backed stablecoin still struggles to achieve liquidity and stability in the wider markets. However, Lippiatt believes that mortgages from such prospective partnership merely involve a “mitigatable” risk.
Thus, neither the property seller nor the borrower will directly touch any digital currency. He added that:
“We will deal with the inner workings of the decentralized system. The borrowers pay back in dollars and we will also be managing the risk profile of the underlying securities.”
Hence, borrowers must submit online credit checks and all other essential information just like in any other online loan platform. Fluidity will then process the information and create a smart contract using a tokenized representation of the mortgage. Lippiatt then explained that the company can then package these loans together and resell them as securities via an exchange like AirSwap.
In his view, the low-income and under-banked borrowers who can repay represent a prime opportunity for these loans. He elaborated:
“The whole portfolio will be a composition of a bunch of different loans. We are looking at methodologies by which we can deploy [underwriting] more algorithmically.”
DeFi smart contracts will offer theoretically auditable records. Moreover, Fluidity plans to offer cheaper rates compared to the banks. Nonetheless, the whole process provides the borrower with a quasi-traditional mortgage. The issuer and the subsequent traders are the main beneficiaries of this blockchain system functionality.
In the end, Lippiatt said that the company’s methodology is designed to offer better pricing. The pricing model solely depends on the intrinsic credit of the transaction. No external factors like the political trade winds and domestic central bank governance policies will affect these Ethereum-based mortgages.