# Collateralization dApp

Liens are a commonly used instrument in mortgages whereby a bank or other authorized entity:

1. creates and holds a lien; and then
2. provides the borrower with funds.

In this case however, while the Lienholder is performing the first action, the second action can be completed directly by the owner of the Lien NFT by collateralizing the NFT on a Defi platform to obtain the funds they are borrowing.

The Collateralization dApp works by allowing the owner of a Deed NFT to create a voluntary lien on their property in favor of a Lienholder. This new lien will be created by a Local Agent partnering with Plano, who has authority within the jurisdiction in which the property is located to create a new lien against the property.

In the case that there is an existing Deed of Trust established for the property, this new lien will automatically take precedence on account of language in the Deed of Trust that allows such eventualities.

When the owner of the Deed NFT wishes to terminate the lien, assuming there are no outstanding obligations, as reported by the capital provider, they may burn the Lien NFT, which will in turn direct the Collateralization dApp to terminate the lien.

### **Authorities**

Each Lienholder has the authority to perform the following actions on titles within the jurisdiction where they are authorized:

* **Create a lien** - 1) create a lien where the Local Agent is the Lienholder; 2) register the lien with the Recording Office and 3) mint a lien NFT.
* **Release lien** - Accept and burn a Lien NFT. It is assumed that when the holder of the Lien NFT is a capital provider, they would not transfer the Lien NFT to the Collateralization dApp while an outstanding obligation exists.
* **Initiate foreclosure** - 1) Using authority provided by the lien, foreclose on the property at the direction of the owner of the Lien NFT; 2) settle debts once the property is sold; and 3) burn the NFT.
