Liquidator Overview

Grunt — 3F’s solution for leveraging RWAs and asynchronous assets — manages leveraged positions through MorphoBorrowPosition contracts deployed on Morpho Blue. Each borrow position is configured with its own liquidation threshold, lower than or equal to the LLTV of the underlying Morpho market, so the protocol gets a window to handle an unhealthy position before Morpho’s native liquidation is reachable. Inside that window liquidation is proportional: repay a fraction of the debt, seize the same fraction of the collateral, with no liquidation incentive factor applied.

Three Liquidation Thresholds

Every borrow position operates under three thresholds at once:

Threshold	Controlled By	Effect
Safe LTV	Grunt (set at position creation)	Operational ceiling. Above it, offer-based pre-liquidation opens
Liquidation LTV	Grunt (set at position creation)	Above it, proportional pre-liquidation opens
Market LLTV	Morpho Blue market configuration	Morpho’s native liquidation kicks in

They satisfy safeLtv < liquidationLtv <= market LLTV, so a position becomes actionable at the Grunt level before it becomes unhealthy at the Morpho level. That gap is the pre-liquidation window, and since v1.3.0 it has two bands rather than one.

graph LR
    H["Healthy<br/>LTV ≤ safe LTV"] -->|"Safe LTV"| O["Offer Band<br/>standing offers"]
    O -->|"Liquidation LTV"| P["Proportional<br/>Pre-liquidation"]
    P -->|"Market LLTV"| M["Morpho Liquidation"]

    style H fill:#16a34a,color:#fff
    style O fill:#ca8a04,color:#fff
    style P fill:#ea580c,color:#fff
    style M fill:#dc2626,color:#fff

Both bands are entered through the same preLiquidate entry point, which dispatches on the position’s current LTV. A liquidator integration written for one works for the other.

Why Pre-Liquidation Matters

If a Grunt position were liquidated directly by Morpho’s native mechanism, the protocol would lose control over the liquidation process. Morpho applies its own liquidation incentive factor, which may not align with the protocol’s risk management.

Pre-liquidation gives the protocol a controlled window to handle unhealthy positions:

• Proportional liquidation — above the liquidation LTV, the mechanism uses proportional collateral seizure rather than Morpho’s native liquidation incentive factor. Liquidators receive a share of collateral proportional to the debt they repay.
• Terms the protocol sets — in the offer band below it, the protocol proposes the terms itself through standing offers, so an early de-risking happens on a price it chose rather than a formula.
• Protocol buffer — the gap up to the market LLTV gives liquidators time to act before Morpho’s own liquidation becomes available, protecting both the protocol and its users.
• Predictable incentives — the proportional bonus scales naturally with how far underwater the position is, creating stronger incentives as risk increases.

Interaction with Facility Flows

Liquidation scenarios also interact with deposit and withdrawal flows at the Facility level. When a Position Manager holds borrow positions that are subject to pre-liquidation, this affects how the Facility handles:

• Partial liquidation — a portion of a position’s collateral is seized to cover part of its debt. The position remains open with reduced collateral and debt.
• Full liquidation — all collateral is seized. This can affect Position Manager share valuations and downstream claim calculations for users holding LP tokens in the Facility.

Liquidators do not need to interact with the Facility directly. Pre-liquidation is called on individual MorphoBorrowPosition contracts and is permissionless — anyone can liquidate an unhealthy position.

Where to Go Next

Page	Covers
Pre-Liquidation	The proportional path above the liquidation LTV: math, interface, callback, monitoring
Offer Pre-Liquidation	The offer band between the safe LTV and the liquidation LTV: how offers are posted, priced and consumed