HIP 12 - Vintage Vehicle Collateral Ruleset

Summary

This improvement proposal aims to establish a ruleset for onboarding vintage vehicles as collateral in the Hifi Protocol. This proposal updates and expands upon the framework established in HIP 3, moving from single-vehicle approval to a broader category-based approach for vintage vehicles.

$VVC1 Parameters

• Collateral Ceiling: 10M
• System Wide Credit Limit: $5M
• 125% collateralization ratio (80% loan-to-value)
• Fixed oracle value: $1 per token

Vintage Vehicle Collateral Ruleset

• Vehicle Eligibility
  • Manufactured more than 25 years ago
  • Must be in excellent or good condition
  • Must have clear title and documentation of ownership
  • Must be stored in a secure, climate-controlled facility
• Valuation Requirements
  • Agreed Value Insurance Policy or Independent third-party appraisal required from qualified appraiser
  • Recent purchase price may be used if transaction represents ≥25% ownership stake
  • Valuation cannot exceed any agreed value insurance policy
• Loan Terms
  • Maximum loan term: 5 years
  • Loan-to-Value (LTV) ratios:
    • Excellent condition: up to 80% LTV
    • Good condition: up to 60% LTV
    • Good condition with personal guarantee: up to 80% LTV
  • Monthly interest payments required
• Insurance Requirements
  • Comprehensive insurance coverage mandatory
  • Lending Partner must be named as additional insured
  • Coverage must meet or exceed loan value

Loan Administration

Lending Partner

• Drive liquidity demand, originate loans, and enforce repayment terms.
• Provide updates to collateral appraisals as appropriate, especially following significant market events.
• Submit financial reports as necessary to notify the Designee of any material changes in borrower status or collateral conditions.
• Verify vehicle title, insurance, and storage facility.
• Manage liquidation processes for real-world assets in case of default.

Designee

• Oversee record-keeping and validate borrower eligibility.
• Mint collateral tokens equal to the value of the collateralized vehicles.
• Enforce credit limits and perform any necessary audits of Lending Partner records.

Legal Framework

The ruleset operates within the existing legal framework established by:

• Designation Agreement with Mainframe Group, Inc.
• Agreement of Association with Finance Ventures

Benefits

1. Scalability: Enables efficient onboarding of multiple vintage vehicle loans without individual governance proposals
2. Risk Management: Establishes clear parameters for collateral quality and loan terms
3. Market Opportunity: Addresses demand for financing in the classic/vintage vehicle market while maintaining conservative risk parameters
4. Standardization: Creates consistent framework for evaluation and monitoring of vintage vehicle collateral

Voting

Upon this proposal’s success, Hifi DAO will execute the necessary variable changes to the Hifi Protocol’s Fintroller and take the necessary technical steps to integrate $VVC1 Tokens into the Hifi Protocol with the set collateral ceiling and fixed oracle value. It is recommended that DAO members review the full agreement for a comprehensive understanding before casting their votes.

The proposal is expected to go live Friday, November 13, 2024 with voting expected to begin on Sunday, November 15, 2024 (48-hour delay).

Additional Resources

• HIP 12 — Collateral Ruleset: Vintage Vehicles
• RWA Framework Improvements
• Collateral Ruleset: Implementation Details