Three color packing

Consider the new company, Home Credit Union.

It contains an internal housing market.  Price innovations in the market are unlikely to be better than a four bit quantization, leaving a bit error of 7% or so. (1/16 = .06...). Home transaction volatility yields mortgage insurance fees. The three color pi bost is taking on home market risk, high, and wants that immediatey reduced with mortgage insurance fees.

The systemis liquid with deposits and loans, all players have the three accounts, transaction fees flat and in a separate known account paid from sales. The loans are generally ten year, deposits five year, so spectrum will be split asymmetrically. We expect the loans to be much more precise than the home sales, but it has to cover a 7% home variation, the buyer must observe a gain in shifting debt for equity greater than 7%. And deposits, being fastest, will always get nearly half that 7% gain in interest gains. The pi boss runs a standard S/L, with very low transaction rates.  Users have to minimize interest losses and minimize mortgage insurance. They can swap between accounts.

The success depends on getting a much larger set of members than home sales, it depends on great selectivity, enabled because transaction costs hae agglomerated and separated. So he S/L pit boss is running a rank 6-8 structured queue for deposits, drop a rank to get loans. Tat generates a small market making risk. The sap between home equity and loan liability is much more liquid for the user.  Bankruptcies are rare and measured, the home owner can move a selected distance from the threat by allocating clear equity for collateral; effectively dropping the bankruptcy insurance charges, which are implicit.  Collateral rations are derived from the home sales variance in its implied market risk.

So the lending function is a bit separated, this is a cascaded system, connected by closing market price and collateral requirements. The Pit boss  should compute and post current collateral insurance fees. I is perfectly reasonable to charge a small board fee for an individual to look at the trade board. Any access to the boards is a delay to others and must be congestion priced.