Tokenized Mortgage Bonds — unfreezing a market that's been stuck for two years
For two years the MBS secondary market has been frozen. Originators hold paper at par on their books that the open market wants to bid at 80c on the dollar. They won't book the loss; without the loss, they can't sell; without selling, they have no liquidity to originate new loans. The freeze compounds.
We built Tokenized Mortgage Bonds (TMB) to thaw it.
The trade
BV buys the MBS at 90c — a 10c premium over open market. In exchange, the originator commits to a 20c future preferred claim payable to BV on a fixed schedule. On a $500M face deal, that's $100M of pref structured as eight annual installments.
The originator gets 90c of liquidity today against the loss they wouldn't book. The 20c pref is a manageable scheduled obligation, not a mark-to-market.
How BV recovers
We absorb the loans into a TMBPool wrapper around our
TranchingEngine. The pool issues three ERC-20 tranche tokens —
senior, mezzanine, and junior — with a typical 50/30/20 capital
allocation and senior 4% / mezzanine 6% / junior residual yield.
Borrower payments flow through MortgageServicing (BV is
servicer-of-record; 25 bps fee), then through the true sequential
waterfall:
- Senior coupon-to-satisfaction — full accrued yield to date
- Mezzanine coupon-to-satisfaction — next
- Junior residual — captures whatever's left
The 10c discount we paid below face accrues into junior NAV as mortgages pay down at par. BV holds junior at acquisition and syndicates portions to qualified LPs as the trade matures.
Base case
For a $500M face acquisition at 90c, 8-year WAL, 0% default:
| Source | Nominal |
|---|---|
| Coupon income (3.5% on declining balance) | ~$70M |
| Servicing fees (25 bps) | ~$5M |
| Discount on principal returned at par | $50M |
| Originator 20c pref | $100M |
| Total BV-side income | $225M |
| BV NPV @ 6% cost of capital | +$95M |
| IRR | ~14.5% |
The break-even default rate is 3.7% annual CDR — roughly the cumulative 26% stress of 2007–2010 subprime. Prime resi 2020–2021 vintage tracks under 1% CDR.
Where this lives in the stack
- Smart contracts:
mortgage-system/src/tmb/(1,001 tests passing) - Pool waterfall:
mortgage-system/src/TranchingEngine.sol - Servicing:
mortgage-system/src/MortgageServicing.sol - Pref claim:
BVOriginatorClaim— standalone, anchored against face, default-acceleration on missed schedule - Atomic deployment:
TMBFactory
The TMB suite landed on testnet this week. Mainnet pending external audit completion.
What's next
We're talking to three originator-side counterparties about the inaugural deal. If you hold MBS that the market won't pay you for today — or you're an investor who wants exposure to senior or mezzanine tranches with audit-grade trust apparatus — that's the trade.
Talk to us about the originator side, or start here for the LP side.