Fannie Mae has officially accepted the first crypto-backed mortgage product, developed by Better Home and Finance and Coinbase, allowing homebuyers to use cryptocurrency as collateral for loans.
Product Acceptance
Fannie Mae, the government-sponsored enterprise under conservatorship, will purchase these loans as conforming mortgages. This marks the first time such a crypto-collateralized product has been approved by Fannie Mae.
How It Works
- Borrowers must maintain a Coinbase account.
- The structure involves a primary mortgage from Better and a secondary loan backed by bitcoin or USD Coin.
- The secondary loan funds the down payment for the primary mortgage.
- Crypto assets are pledged and held in Coinbase Prime custody for the loan's entire duration.
- Loan terms remain unchanged even if crypto values drop, as long as monthly payments are made.
Target Audience and Benefits
The product targets individuals with significant crypto holdings who wish to avoid selling assets to prevent tax liabilities and preserve future appreciation. It also aims to help younger generations struggling with traditional down payment savings.
Key Statements
Vishal Garg, CEO of Better, stated: "We have now finally created the infrastructure rails to enable any tokenized asset in America to be able to be pledged to help someone afford to buy a home." He foresees expansion to other assets like stocks or funds.
Max Branzburg, head of consumer and business products at Coinbase, said: "Token-backed mortgages are a major first step to unlocking homeownership for the younger generations that have struggled with barriers to saving for a traditional down payment."
Example Scenario
For a $500,000 home, a borrower can pledge $250,000 in bitcoin to secure a $100,000 down payment loan. The crypto remains in custody and is returned once the loan is fully repaid.
