I don't know if I'm missing the point here, but what are the benefits of doing this to either buyer or lender? Neither party touches cryptocurrency, and the buyers pay back the mortgage in dollars, just like they would with a normal mortgage. Similarly, the buyers will have to undergo the same personal information checks, credit checks, income assessments, etc., and still be subjected to all the same laws and legal systems as they would with a regular mortgage.
They say they want to deploy underwriting more effectively, but there is no reason that this would require a smart contract to do. They also say they want to provide cheaper rates, but don't elaborate at all on how they plan to do so or what a smart contract has to do with it.
Topic: [2019-05-08] Mortgages Are Coming to Ethereum This Summer (Read 116 times)
https://www.coindesk.com/well-tokenize-the-house-mortgages-are-coming-to-ethereum-this-summer?utm_source=twitter&utm_medium=coindesk&utm_term=&utm_content=&utm_campaign=Organic%20
On Thursday the fintech startup Fluidity will announce plans for the first ethereum-powered mortgages in California and New York, CoinDesk has learned.
Fluidity execs say the offering is slated for this summer, once all the licensing paperwork is finalized.
“We’ll tokenize the house, which will effectively take the collateral that is the equity of the house,” said Fluidity chief architect Todd Lippiatt. “You’re pledging the house and you get an advanced rate back in terms of dollars.”
Fluidity formed in early 2019 when the ConsenSys decentralized exchange (DEX) merged with the FINRA-registered broker-dealer Propellr. Fluidity co-founder Sam Tabar told CoinDesk that although ethereum mogul and ConsenSys founder Joe Lubin is still a major shareholder in AirSwap, now a Fluidity subsidiary, the newborn parent company has a distinct set of shareholders – including veteran crypto investors like Brock Pierce, Bill Tai and Lubin’s former college roommate, Mike Novogratz.
Fluidity’s upcoming mortgages will use smart contracts and cryptocurrency for back-end management. Lippiatt told CoinDesk his startup is currently exploring partnerships with ethereum-centric lending platforms, such as MakerDAO’s dollar-pegged DAI loans.
Although the ethereum-backed stablecoin is still struggling to achieve stability and liquidity in broader markets, Lippiatt said mortgages from any such prospective partnership would merely involve a “mitigatable” risk. This is, in part, because neither the borrower nor the property seller will directly touch cryptocurrency.
“We will deal with the inner workings of the decentralized system,” he said. “The borrowers pay back in dollars and we will also be managing the risk profile of the underlying securities.”
In short, borrowers will need to submit online credit checks and personal information just like any other online loan platform. Fluidity processes the information and creates a smart contract with a tokenized representation of the mortgage. Lippiatt said these loans could then be packaged together and resold as securities through an exchange like AirSwap.
In his view, underbanked and low-income borrowers who are able to make repayments represent a prime opportunity for such loans.
“The whole portfolio will be a composition of a bunch of different loans,” he said. “We’re looking at methodologies by which we can deploy [underwriting] more algorithmically.”
DeFi smart contracts will provide theoretically auditable records, plus Lippiatt said Fluidity plans to offer cheaper rates than banks. Still, the process itself offers the borrower a quasi-traditional mortgage. It’s the issuer and subsequent traders who gain the most functionality from this blockchain system.
In conclusion, Lippiatt added:
“Our methodology provides better pricing that is determined solely by the intrinsic credit of the transaction, as opposed to external factors like domestic central bank governance policies and political trade winds.”
The company plans to make the announcement later today at its second Fluidity Summit in Brooklyn. The one-day conference sold 900 tickets this year, 120 more than in 2018, according to event staff.
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