Crypto Mortgages Powered by Ethereum Are Coming to New York and California

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California and New York residents could soon be taking out mortgages that are facilitated by cryptocurrencies and smart contracts.

On Thursday, Fluidity, a fintech start-up, announced its plan to launch the first Ethereum-powered home loans in those two states by this summer, according to a tweet from the company.

Prior to the official announcement, Todd Lippiatt, Fluidity’s chief architect, outlined to CoinDesk how such an offering would work.

“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.”

“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.”

Fluidity is looking into partnerships with Ethereum-based lending platforms, and borrowers will have to submit online credit checks, just as they would for a more traditional loan, Lippiatt explained. Fluidity plans to process their data and generate both a smart contract and a tokenized form of the mortgage, he said.

Having neither the borrower nor the seller actually dealing with the cryptocurrency helps reduce the risk to a “mitigable” amount, Lippiatt reportedly 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.”

Fluidity co-founder Michael Oved announced in a blog post in early 2019 that Fluidity was merging with Propellr, an end-to-end platform for creating, managing and servicing digital assets, to form Fluidity Factora.

“Together, we are taking complex financial assets, breaking them down into their basic factors, and encoding them to a blockchain. This enables standardization, transparency, and liquidity, making capital markets more efficient and reducing the need for expensive middlemen.”