I don't think this is actually hedging at all, but rather allowing loans denominated in other currencies but settled in BTC...
Who decides on the "hedge"? The borrower when creating the listing or the lender when funding?
The loan is still denominated in Bitcoin.
When the listing is activated the aquivalent amount of the loan is calculated using the other currency.
When the payments are made, the amount to be paid in bitcoin is calculated using the current exchange rate (accordingly to MtGox) with the target currency.
http://en.wikipedia.org/wiki/Hedge_(finance)#Categories_of_hedgeable_riskhttp://en.wikipedia.org/wiki/Currency_riskRight, which means the loan is actually a USD (or Euro or whatever) loan however you want to spin it. The value of BTC never enters into it; is just payable in BTC. This is not a hedge. A hedge is a position that protects against the risk in another position. A true hedge would be to lend 10 BTC and then go sell short 10 BTC at $X, or more likely to buy an option to sell 10 BTC at $X. Posting a link to the Wikipedia article on hedge doesn't make what you are offering a hedge. (Incidentally, from the very first line of said article: "A hedge is an investment position intended to offset potential losses/gains that may be incurred by a companion investment." There is no companion investment in what you are doing.)
But whether you are offering is properly called a hedge or not is not really important. However, you failed to answer actual question in my post, so I went to the site and did it myself: it appears that the buyer decides payback calculation when they create a loan.