OIP-145: Bridge Loans Pre-Cooler

abipup

Note: this is a time sensitive proposal. The governance timeline is compressed accordingly.

Summary

Create a short term loan facility on Vendor V1 (on mainnet) with enough capacity to accommodate current borrowers on Rari. This gives Ohmie borrowers the opportunity to take a bridge loan between now and Cooler deployment, with better terms than what's available now. It also keeps costs in the Olympus ecosystem, instead of fees leaking to external parties.

Previous discussions related to Vendor Finance can be found here:

https://forum.olympusdao.finance/d/2047-tap-21-pilot-clearing-house-deposits

https://forum.olympusdao.finance/d/3337-tap-26-expansion-of-vendor-finance-partnership/

Motivation

Soft landing: It's clear that there is excess demand for borrowing that the Treasury can help fill while Cooler is being implemented. Rari borrowers can rehypothecate into a "soft landing" bridge loan until Cooler arrives. We propose to deposit enough DAI into the market to be able to service all gOHM collateral in Rari at a 50% LTV.

Capture revenue: Ohmies are paying high interest on their gOHM-collateralized loans, which largely exits the ecosystem. This was a main motivator for Cooler, but we can address the value leak now with a short term Vendor market. This allows the Olympus Treasury to keep fees in the ecosystem, bringing value back to OHM holders.

Definitive backing: Vendor markets have specific closure dates, with repayment required prior to that date. The vast majority of current gOHM-collateralized loans don't have a definite payback date, including those written by Rari. It's not certain when the Treasury could expect that money back. This makes it difficult to consider those assets as backing for Cooler loans. Using a Vendor market instead makes it possible to take those assets into account for the Cooler-mandated backing calculation.

Stay the course on consolidation: one alternative is to put FRAX into Fraxlend. This backtracks on the current Treasury mandate to prepare for Cooler by consolidating into DAI. Vendor accepts DAI markets and allows the DAO to maintain course on asset consolidation.

Proposed terms

1,000,000 DAI deposited into Vendor (bringing total DAI deposited in Vendor V1 to 1.5M)
30 September 2023 expiry date
3.5% annualized rate
1,415 DAI lent per gOHM collateralized (~50% LTV)

Voting schedule

This OIP will be on forum for 24 hours, followed by a 2 day Snapshot.

Poll: should the DAO create a short term loan market on Vendor?

Shpadoinkal

I think this is a good idea as frax is just too high but I think the LTV is too low for this to have much of an impact.

abipup

Shpadoinkal the key benefit is to recoup the Treasury assets in Rari, raising backing vs current. We do this by incentivizing the current borrowers to move their loans out of Rari with a favorable bridge loan

Shpadoinkal

abipup got it from that perspective it makes sense and I support. I meant more that it won't allow for much refinancing out of frax which would be significantly more revenue to backing. Although we're only talking 30 days or so. Overall I vote yes.

citizen_wayne

There's a pattern emerging with Vendor proposals being hastily formulated, see the nearly unanimous rejection of past proposals (https://forum.olympusdao.finance/d/3458-tap-26a-expansion-of-vendor-finance-partnership). Concerns raised previously remain unaddressed, yet a similar proposal is being made again.

The latest proposal advocates for a short-term loan facility, raising more questions than providing solutions. Framed as an urgent response, the necessity of such an initiative is questionable considering existing lending facilities available to Rari users. Importantly, this new venture could potentially shift focus from our primary goal - the implementation of the Cooler.

Given the ongoing concerns related to Vendor, and the risk of this proposal diverting focus from our strategic objectives, a careful approach is advisable. Our priority should remain on the deployment of the Cooler and the execution of our strategic plan, to ensure the long-term viability of Olympus. It's crucial to remember that hurried decisions may result in outcomes more costly than the proposed benefits. Hence, a fact-based, careful consideration is urged before voting.

hazat

move their loans out of Rari with a favorable bridge loan

Alina

Bridge loans are short-term financing options designed to help borrowers bridge the gap between buying a new property and selling an existing one. They are particularly useful in competitive real estate markets where buyers need to act quickly. These loans typically come with higher interest rates and fees but offer the advantage of fast approval and flexibility. For more details, you can check out this guide on bridge loans for buying a home. It's important to have a clear plan for repaying the bridge loan, either through the sale of the current property or securing long-term financing. Borrowers should carefully assess the costs and benefits to ensure a bridge loan is the right solution for their needs.