A Michigan couple has secured the first Fannie Mae-backed mortgage using Bitcoin as collateral, marking a significant milestone in the mortgage industry.
First Bitcoin-Backed Fannie Mae Mortgage Completed
A significant milestone has been achieved as a couple from Michigan has completed the inaugural Fannie Mae-backed mortgage using Bitcoin as collateral, according to Coinbase's announcement on Thursday.
The borrowers, Joe and Amy, collaborated with mortgage lender Better to secure this innovative home loan, utilizing their Bitcoin holdings for the down payment while benefiting from the protections of a government-backed mortgage.
Coinbase noted that this product, introduced earlier this year, is expected to become available to qualified borrowers across the country in the near future, with plans to initially include Circle’s USDC stablecoin. This new offering enables homebuyers to leverage their cryptocurrency investments without needing to liquidate their assets.
Mark Troianovski, Coinbase's Head of Consumer and Platform Partnerships, emphasized that many Americans have amassed significant wealth in digital assets, and this initiative provides a pathway to homeownership, opening doors for future generations.
Traditionally, the mortgage sector has viewed cryptocurrencies as too volatile for use in conventional mortgage down payments. However, following a policy adjustment by Bill Pulte, director of the Federal Housing Finance Agency, the agency has been directed to embrace cryptocurrencies on centralized exchanges, aligning with broader efforts to position the U.S. as a leader in the crypto space.
According to the updated policy, only digital assets held on centralized platforms qualify for mortgage collateral, excluding those in self-custody wallets. This marks a shift from conventional asset evaluations focused on stocks and bonds.
Coinbase explained that by using Bitcoin as collateral, borrowers can avoid capital gains taxes and maintain the potential for future appreciation of their assets. Unlike previous Bitcoin-backed lending options, this new approach does not trigger liquidations due to market fluctuations, ensuring that price volatility will not affect borrowers.
Clients using this service from Coinbase will receive two loans: one adhering to federal and Fannie Mae regulations and another linked to the crypto asset as a second lien on the property. For instance, a borrower could secure a $100,000 down payment on a Fannie Mae mortgage by pledging $250,000 worth of Bitcoin as collateral. If payments are overdue by 60 days, Better retains the right to liquidate the pledged cryptocurrency.
In January, Newrez, a national wholesale lender, also announced plans to accept Bitcoin and Ethereum, marking its entry into the crypto mortgage market, albeit with limitations on the types of products and significant discounts on crypto valuations.
Despite the innovative steps taken, Pulte's directive has drawn criticism, particularly from Senator Elizabeth Warren, who warned that this could introduce risks for consumers and raise concerns about the stability of U.S. housing and financial markets.
