● Business Name: Havenly Digital, LLC a Delaware limited liability company, a wholly owned subsidiary of Havenly Financial Inc.
● Current AUM: Havenly Financial manages a $10M AUM (this represents a 51% ownership in Town Square Mortgage & Investments, LLC valuation)
● $ Volume of Transactions Completed Last 12 months: Havenly Digital’s affiliate, Town Square Mortgage & Investments, LLC’s, loan production - Sep '21 thru Aug '22 - $925M
● Target Launch Date: Jan 2023 [tbd]
● Location and Team Size: Havenly Digital, LLC Newport Beach, CA headquarters; 12 team members
● Years in Operation: Havenly Digital was founded in 2020, core team members have worked together since early 2020, with expanded team in place since 2021.
Parent: Havenly Financial was founded in 2019, founding team has worked together 20+ years.
Affiliated mortgage loan originator: Town Square Mortgage & Investments, LLC in business since 2009.
● If less than 2 years in operation, number of years founding team has worked together: refer to above, Havenly digital LLC in place since 2020 with core team, expanding in 2021.
● Historical Loan Tape (years): Havenly Digital through its parent, Havenly Financial, has access to over 10 years of loan origination data from it’s affiliate Town Square Mortgage & Investments, LLC if required.
● Key Professional Partners (legal, accounting, operational, technical, structuring):
Legal: Noonan & Lieberman
Technology: Nimbold Consulting
Operational / Structuring / Risk Management: Havenly Financial Inc.
Other Audit and Accounting: tbd
● Describe your business and go to market strategy: Havenly Digital is a wholly owned subsidiary of Havenly Financial and is focused on leveraging emerging digital technologies. Our mission is to facilitate more participation in the US housing market by:
Opening up new liquidity channels to support home lending
Expanding product offerings to match borrower needs with investor risk appetites
Opening up residential mortgage yields direct to accredited investors.
● What makes your approach unique within your industry?
We specialize in ‘portfolio’ mortgage products demonstrating long term stability. Due to their stable income potential, these products are typically held on bank balance sheets.
Havenly Digital’s unique ‘revolver’ fund structure allows us to manage the mortgage portfolio in line with our investment thesis and objectives.
● Why are you a good partner for Centrifuge? (new & shared)
Havenly Digital brings a solid partnership with seasoned mortgage, finance, and digital technology leadership and experience.
Our executive team has decades of experience originating, securitizing, and managing portfolios of mortgage loans against diverse rate environments and macro conditions.
We have well established reputations and industry connections with funding and secondary market investment partners.
We have a shared passion for bringing innovative solutions to market with a track record of working with VC supported startups and accelerator growth companies.
● How do you differentiate yourself from competitors?
We pride ourselves on our mission to expand access to home ownership and our attention to underserved markets.
We intend to be a premier provider of market-leading real world yield products to crypto finance.
Our unique ‘revolver’ fund structure and proprietary product development, pricing and loan selection process allows us to bring RWA in the form of residential mortgage yields.
● How is your entity financed today, what are the current sources of capital:
Equity raised: Havenly Financial has raised $500k from founders
Debt raised: $0. Revolving Credit facility to support mortgage acquisition
● What is your entity’s revenue/fee model:
Origination fees: c. 1% (100bps) Expected fee-based revenue
Target spread: 1-4% (1-400bps) Expected risk-based rate margin revenue, received from Issuers stake (refer to below)
● Please explain the source(s) of, and ability to scale, your first-loss junior (TIN) capital in the pool:
To align issuer and investor interests in the fund and absorb cash flow fluctuations inherent in the revolver structure, Havenly Digital (the issuer) intends to retain a 10% interest in the junior tranche (TIN).
Additionally, to support redemptions and new fundings, the issuer also intends to assume a 5% pari-passu stake in the senior tranche (DROP).
● Capital relationships and how much you will bring through Centrifuge KYC to invest in either senior or junior tranche of your pool:
The issuer intends to leverage existing credit facilities with major US banks to support the initial mortgage portfolio acquisition. The credit facility is refreshed upon secondary token sale on Tinlake, thereby becoming available for further mortgage acquisition and pool expansion.
Similarly, the issuer intends to leverage existing secondary market investor relationships to drive adoption and investment into the pool across senior and junior tranches as per investor risk appetites.
● Outline why DeFi is important to your business strategy:
DeFi opens up liquidity channels for mortgage funding, allowing for greater product expansion to support underserved mortgage markets.
Introduces institutional grade digital asset investment opportunities for accredited retail & institutional investors.
RWAs provide alternative opportunities for capital preservation with yield in comparison to traditional DeFi digital-asset collateral.
Prudently minimize middlemen fees through disintermediation, resulting in higher yields available to investors.
● Articulate why Centrifuge’s community and protocol is a fit for financing:
Havenly Digital’s vision of ‘increasing access to homeownership in underserved market segments through expanded liquidity options for residential mortgages and relevant products’ aligns with Centrifuge’s mission of connecting people to borrow and lend money transparently and cost-effectively; free of rent-seeking intermediaries and the inefficiencies of traditional finance.
Centrifuge’s platform provides a transparent, cost-effective, and scalable platform to build upon as Havenly Digital seeks to expand its funding options and expand access to mortgage product yields to retail and institutional investors.
Structure: Risk & Terms
● Please explain the key risks inherent in this opportunity and asset class:
As with any mortgage-related product, the principle risks are centered around Credit Risk (borrower prepayment and defaults), Market Risk (e.g. property value), Interest Rate Risk impacting new supply (originations) and payment / cashflow performance on existing assets, and Liquidity Risk impacting redemptions, payouts and notes refinancing.
Our team is made of industry veterans with decades of experience in managing mortgage portfolio risk.
Our risk management approach starts with asset-selection, due diligence, and portfolio structuring; taking into account rate environments and broader macro factors.
We continuously monitor the risk-return profile of the portfolio and our unique revolver structure allows us to manage the underlying asset risk more effectively than a traditional mortgage backed security (MBS)
Additionally, Regulatory Risk plays a factor given the likely evolution of crytpo regulation globally. We are continuing to monitor this situation for any pertinent developments.
Market Risk: reflects potential impact resulting from macro factors and other external events (e.g. natural disasters, property values, etc.)
Interest Rate Risk: relates to interest rate increases/decreases, which could impact asset cash flows as well as default rates and origination pipelines.
Credit Risk: relates to the risk of borrower pre-paying mortgages or defaulting on their payment obligations. These can adversely affect mortgage asset valuations.
Regulatory Risk: Havenly Digital or its investments may be adversely affected by changes in government, regulatory, regulations, legal, or accounting changes.
Liquidity Risk: reflects the risk of the issuers inability to meet redemption requests or retire the notes in a timely manner due to liquidity constraints in the secondary mortgage market for the residential mortgage loans supporting the notes, or due to our ability to refinance the notes through the Tinlake platform.
● Pool Size & Pipeline:
At Launch: projected ~ $1M
6 Months after Launch: projected ~ $2M
12 Months after Launch: projected ~ $5M
Origination Pipeline Details: Mortgage assets are purchased from affiliated originator using standard mortgage secondary market processes and are then placed into the securitized pool underpinning the issuance on Tinlake.
● Asset & Rates:
Asset Type(s): 2-3 year notes representing sequenced, discounted cash flows backed by US residential mortgages.
Average Ticket Size: Average mortgage size represented in underlying asset pool is ~ $275,000.
Average Asset Maturity: 2-3 year notes supported by payments from 30-year residential mortgage loans with average expected life of 7-10 years, factoring in prepayments.
Expect Default Rate: < 3.5%
Expected borrowing rate on senior tranche (on-chain): 4-5%
Expected lending rate to end borrower (off-chain): 6-12%