Fluidity, a fintech startup, is on the verge of offering ethereum-based mortgages in New York and California. Its management team revealed that once all the licensing paperwork is finalised it should be able to launch this summer.
Fluidity chief architect Todd Lippiatt said, “We’ll tokenize the house, which will effectively take the collateral that is the equity of the house.” He added, “You’re pledging the house and you get an advanced rate back in terms of dollars.”
Fluidity formed in early 2019 when the ConsenSys decentralised exchange (DEX) merged with the FINRA-registered broker-dealer Propellr. Sam Tabar, one of the Fluidity co-founders told Coindesk that whilst ConsenSys founder Joe Lubin is a major shareholder in Airswap, 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.”
The Fluidity mortgages will use smart contracts and cryptocurrency for back-end management, and the company is currently exploring partnerships with ethereum-centric lending platforms.
One of those partners is MakerDAO’s stablecoin pegged to the USD, which is still trying to achieve stability and liquidity in the markets. However, 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.
He explained: “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.”
Coindesk further elucidated how the system will work for a person wanting a mortgage: “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.”
Fluidity believes that the product will enable under-banked and low-income borrowers who are able to make repayments represent a prime opportunity for such loans.