Creating a token backed by mortgages sounds like a dangerous idea, especially in today's climate where the economy is quite volatile and defaulting on loans tends to happen far more than typical models would predict.
What systems are in place to prevent this token from relying on "bad debt" and ending up in a situation where there is insufficient real-world capital to back the tokens?
Response to your question:
We agree with your first point about poor default prediction which is why we have stricter credit qualifying policies than GSEs and other lender overlays.
The demand for greater mobile financial access solutions will continue to grow and unlike Dodd-Frank that caused a lot more problems than it solved, mobile automation on the blockchain solves a lot more problems (human error, data security, data process validation, lowers costs) than it creates.
Mobile automation simply gives consumers the ability to complete on their phone all the same steps they would normally complete with 3 - 4 different human beings over the phone. A lot of this information consumers already provide to other companies on their smartphones when transacting with them.
Managing the data shared across the blockchain ensures data integrity and dramatically reduces human errors. Loan file data validation is already being completed by GSEs underwriting platforms on a centralized system so this is nothing new. All Bee App will be doing is utilizing the blockchain for validation instead of the GSEs platforms (unless Bee App chooses to write a loan based on DU/LP approval then that file would be run through their UW system and therefore insurable for delivery to the GSE in a capital needs event).
On your second question, every lender has the same potential capital problem. However, with our enhanced credit policies and advanced technology (back end architecture), our model reduces our exposure to bad debt. No lender, including ourselves, can completely absolve themselves of this position. This is a natural part of lending and risk management however our new tech doesn't expand that risk, it reduces it. We don't believe the same amount of bad debt that rekted the market 10 years ago exists today because that level of sub-prime origination fraud doesn't exist anymore. Eliminating that was the one of the best things Dodd-Frank did.
The token itself being "backed by a mortgage" simply means that our ecosystem data that's shared on the blockchain is the mortgage file loan docs. That loan agreement represents a collatoralized debt obligation by the borrower and is secured by the home and property asset.
These docs are no different than the docs any other lender executes origination and settlement with. The different is the shared data management of the information across the blockchain by each authorized party transacting within the Bee App lending channel instead of having it centrally controlled.
