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  • Introduction
    • Mortgage product
    • Earn product
    • NEW! Refinance
  • How MortgageFi Works
    • Mortgage borrowers
      • Early repayment feature (ERF)
    • Earn - Liquidity Providers
    • Refinancing
  • Getting Started
    • Components
      • Mortgage Vaults
      • Earning Vaults
      • Loan NFTs
      • Defaults
      • ERC20 Integration
    • Points system
      • Liquidity Incentives
      • Referral Incentives
  • FAQ
    • General
  • MortgageFi Ecosystem
    • Contracts
    • Audits
    • Governance Structure
    • Integrate your own token
      • Integration Process
      • Benefits of Integration
      • Considerations
      • How to apply
    • Self-Balancing Protocol
      • Three Pillars
      • Protocol Design
      • How the System Balances
      • Security and Attack Vectors
      • Advantages of This Model
  • Under-Collateralized Loans
    • What are Under-Collateralized Loans?
    • Key Features
    • How it works
    • Risk Management
    • Benefits for Borrowers
  • Compared to other Lending
    • Use Case Example
  • Comparison Examples
    • Funding Rates and Position Stability
    • Zero-Sum Game vs. Mutual Benefit
    • Long-Term Holding vs. Short-Term Trading
    • Risk Profile
    • Costs and Predictability
  • Yield for Earn Vaults
  • Risk Management
    • Risk Management Strategies
    • Risks and Mitigations
    • User Responsibilities
    • Community Risk Management
    • Ongoing Risk Management
  • Strategies
    • Long vs Short-term Strategy
      • Long-term strategy
      • Short-term strategy
      • Comparing the Strategies
    • Hedge against the bear market
    • Cross-Chain Operations
    • Token Sink
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  1. Risk Management

Risk Management Strategies

PreviousRisk ManagementNextRisks and Mitigations

Last updated 1 month ago

  1. Under-collateralized Loan Management:

  • Strict repayment schedules to mitigate risk

  • Clear conditions for loan default (failing to keep up repayments)

  • Collateral and previous payments cover potential losses keeping the protocol solvent

  1. No Traditional Liquidation Risk:

  • Unlike typical DeFi loans, MortgageFi loans do not carry sudden liquidation risk

  • Loans enter only if repayment terms are not met

  1. Oracle-Free Price Discovery:

  • Relies on market-driven pricing through arbitrage

  • Eliminates risks associated with oracle failures or manipulations

  1. Gradual Fund Integration:

  • 3-day streaming mechanism for new deposits and token sales

  • Prevents large-scale manipulation and flash loan attacks

  1. User-Triggered Default Resolution:

  • Community-driven approach to handling defaulted loans

  • Incentivizes users to maintain system health

  • Efficiently returns funds to the Earn pool

  1. Diversification of Assets:

  • Support for multiple ERC20 tokens spreads risk across various assets

  1. Fixed USD Repayments:

  • Protects the system from volatility in borrowed asset prices

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