Crypto-Backed Mortgage Loans Launch, Spark Senate Concern Over Foreclosure Crisis Risk
Twelve years ago, Vishal Garg, CEO of Better Home & Finance, struggled to buy a house. He realized that he had to sell assets and pay capital gains tax to convert them to cash for the down payment. This sparked an idea: why can't he directly pledge his assets instead of having to liquidate them?
Garg's solution is now a reality. In March, Better partnered with Coinbase to launch crypto asset-backed mortgage loans. Borrowers can pledge Bitcoin or USDC to obtain two loans: one meets Fannie Mae standards and the other is a private financing loan for the down payment.
The collateral requirement is 250% for Bitcoin and 125% for USDC. This means that if the down payment loan amount is $100,000, then $250,000 worth of Bitcoin is needed as collateral. A drop in Bitcoin prices will not change the mortgage loan terms, but borrowers must repay both loans simultaneously.
The product targets 'asset-rich but cash-poor' homebuyers and has already seen success. By June, a couple in Ann Arbor, Michigan had completed the first loan under this model, and before the product officially launched, there were over $250 million in potential loan volume on the reservation list.