4min chapter

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$BACON Coin: Fractionalizing Home Loans on the Blockchain

Modern Finance

CHAPTER

What's the Real Value of Refinances?

Mortgages can be bought and sold based on whoever's willing to take it out at whatever rate. At that point, the borrower just have to improve it. The interesting thing about as the rate could never go up, meaning you would never take out alone at a higher rate from the consumer perspective,. rigt in, how much of what you do can be automated?

00:00
Speaker 1
Yes,
Speaker 2
that's a great point. I mean, any refinance to day is just such a huge pair in the ass. You have to make sure it's really worth it, you know, to mean thak, the rates could change by th your mid process, or you have to scramble til, i ua, lock in the rate as fast as can with someone the ret an army of paper work to get it done. So, well, you're describing as something ais a lot more. Ni, mean, just like it'll be like a docue signd at that point, right? Itl js be a handful of cleks mell cind to be done and en locked into a new rape, versus havin to to
Speaker 1
go through an entire process again, right? And maybe even more lightweight than that. I think the interesting thing about that is, where's the real value? It's when you unlock and basically split apart the lean from the actual mortgage itself, then that lean has value. And that means that can be bought and sold based on whoever's willing to take it out at whatever rate. And at that point, the borrower just have to improve it. So, like you said, thot docku, sign or click a button, or however we can do it in a compliant way, so that everybody understands exactly what they're getting. The interesting thing about as the rate could never go up, meaning you would never take out alone at a higher rate from the consumer perspective,
Speaker 2
rigt in, how much of what you do can be automated and pushed into the realm of the block chain and decentralized finance verses t there has to be some component of tt, of this that is centralized, and that requires relogistics. And what happens when there is an actual default like that? Stuff can't just be dealt with. It's a very high touch environment. Is that kind of wore you sit in. You're the piece that has to deal with the high touch, if need be,
Speaker 1
exactly. And and we're trying to keep that surface area as small as possible. And and down to the lean itself, which is recorded at the county level to day and will continue to be, that is basically the instrument that we would use or somebody else would use if something happened with the loan. But of course, the nice thing about the block chain and the amount of liquidity that's out there is we can be a lot more flexible. And so you can imagine a world where foreclosures as we know them don't really exist any more, and rather a world where there's a lean on the house for exmona dollars. Somebody doesn't pay over a certain time period, and that lean crows and grows as they're unable to pay. And then hopefully that borrower's able to of come back in and and repay it and get it back to where it was. Or maybe they're not. But if they're not, they're not in a situation where all of a sudden somebody's taking the house, and there's some flexibility amy well, maybe that nft immediately becomes something that a different set of potential investors might be interested in. And that's what happens in the market to day. It's just not very liquid and not very transparent. There's plenty of people out there who will buy mortgages it areint trouble, but that's a very difficult market to penetrate. And from a consumer perspective, there's no way either to get access to it or to know what's going on, or what's a vail about there. Whereas if it's on the block chain, somebody can easily see it, scoop it up intoa of mortgages that they're interested in investing. And maybe they're not even somebody from the united states. Maybe they have a long term bullish theme on us. Real estate, and they're willing to pick up a bunch of those loans where normally they they wouldn't. And if you look at some of the crises that have happened in the past, it's a really interesting idea that it's liquidity from around the world that probably could have helped. So a lot of the crisiss we've had in the past, mean, we just couldn't get money into the system fast enough to save a lot of those loans and a lot of those individual consumers. And the government stepped in and really tried to do that for us, basically. But imagine if that was something that happened world wideye,
Speaker 2
that's fascinating.

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