[Proposal] USDC Homes - Portfolio Manager: Bridge Loans for Mortgages by 3D3N

Introduction:

USDC.homes is a borrower and lender-focused marketplace that facilitates real estate lending collateralized by cryptocurrency. Homebuyers can borrow up to 100% LTV, capped at $5M, with average interest rates of 5-8%.

In addition, cryptocurrency can be used for the initial down payment, collateral and monthly installments. Lenders can provide capital to fund markets and earn interest on highly securitized loans.

While there have been significant strides made in implementing traditional financial services with DeFi and blockchain, unlocking the crypto-mortgage use case for consumers will be one of the next essential steps towards adoption in the Real Estates finance context.

What We Do:

We are partnered with real estate brokerages and mortgage lenders, who believe that mortgage underwriting should include cryptocurrencies and NFT’s as portfolio assets. The platform launched this April and the first mortgage was approved shortly after. To accomplish this goal, our focus is dedicated to both borrowers and lenders already active in DeFi.

For Borrowers:

The USDC.homes target borrower is a crypto-savvy professional who is looking to use their ETH, BTC, USDC, and other blue chip tokens and NFT’s to provide greater access to mortgages for those in the crypto community. Aside from the pioneering use case of activating cryptocurrencies to the homebuying process, additional user benefits include avoiding the taxation on crypto gains, staking the down payment and additional collateral to offset monthly payments with yield earnings, and interest rates as low as 5.5%.

For Lenders:

Lenders (liquidity providers) can expect a highly secure, stable return. Our initial product will be a one year term note with all principal due at the end of the term. Initial borrowers will be required to escrow 100% of the purchase price in USDC during the loan term. Additional consideration may be made for ETH and BTC, if used inplace of USDC. Borrowers will be able to utilize the yield streams from their capital to apply toward their monthly installments.

Portfolio Description:

The Beta Pool for USDC.homes has 36 borrowers where each of the borrowers is requesting a loan in the range of 500K - 1.5M. Based on the underwriter’s feedback on the user, the interest rate will vary between 5% - 8%. The current product is a 1 year, interest-only loan, where borrowers will have to repay the loan at the end of term, or refinance into another loan product.

The Portfolio Manager (PM) is Patrick Tighe, an attorney, licensed real estate broker, and real estate developer in Austin, TX. Over the past decade, Patrick has advised clients working on commercial and residential development. In addition, Patrick’s law firm, The Tighe Law Firm, actively innovates at the intersection of Real Estate Finance, Crypto Currencies, and Web3 Technologies.

Transaction Structure:

The portfolio will have an initial life of one year and an initial maximum size of 5,000,000 USDC. Loans from TrueFi lenders will be drawn bi-weekly or monthly in amounts to be determined by the manager until the maximum pool size is reached and the pool is closed to new lenders. Each loan will feature a 1 term and coupon payment of 5-8%, payable monthly.

The mortgage process includes the following:

  1. Pre-approval
  2. Borrower selects home with broker - either us or your broker
  3. Put in offer, make contract assignable
  4. Proceed to underwriting
  5. Final approval
  6. Closing - lock up funds on chain; sign paperwork IRL, the borrower now owns their home

In the event of Default, Assets that are kept as collateral for the loan that have not been paid for would transfer to Lender.

  • Lender becomes the owner of the crypto collateral with a lien on home equal to any difference in the value of the crypto and the property
  • If the assets held are equal to the value of the home, the borrower retains full ownership of the property.
  • Buyer can reinstate Loan by getting current on payments, fees and penalties in Default within 60 days of the initial default.

Loan flow process: USDC.Homes transaction structure

Website:

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So excited for this to be live and done in collaboration with the Teller Protocol and team.

Teller has a lot of exciting verticals being launched and I hope this will be the first of many collabs.

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This looks really interesting!

Quick question around the use of NFTs as collateral. If a borrower defaults and the lenders become owners of the crypto collateral, which may include one or more NFTs, would the PM be responsible for fractionalizing the NFT so lenders get exposure to their pro-rata share of the NFT(s)?

See: https://fractional.art/

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Awesome question! It is the Portfolio Manager’s responsibility to liquidate crypto collateral. For NFTs in particular, the NFT would either be posted to OpenSea for auction, or potentially fractionalized through Fractional and sold to a community. Additionally, the Portfolio Manager could work with an NFT appraisal company (such as Upshot) or an NFT insurance provider to find an accurate floor price for liquidation.

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I’m excited to see this happen!

I’m curious about what happens when a borrower’s collateral significantly increases or decreases in value. Could you explain more on this?

We are too!

Collateral includes both the property itself, which is eligible for foreclosure on default, as well as specific crypto assets. We consider crypto assets in the form of USDC, ETH, BTC, or blue chip NFTs, which act as additional collateral to the home’s value.

Collateral requirements vary per asset; ETH/BTC must be 150% collateral-to-loan value, while USDC must be 100% of collateral-to-loan value. The crypto collateral has no liquidation risk, and, in the case of volatility, there would be no requirement to add or remove collateral until the loan is over. Also, during the loan duration, the borrower can keep earning yield on the crypto collateral used.

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That makes sense, thanks!

Manager’s address will be: 0x19885377b0d10c7697dF33EdA5cb276C9837ebAE

Great work USDC.homes team. Very excited that this just went live:

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