Fannie Mae is planning to accept cryptocurrency as mortgage security in the first time in its history, allowing owners of digital assets to receive a mortgage. The scheme allows potential customers to secure down payments with Bitcoin or the USDC stablecoin as the collateral by a three-way agreement between Coinbase and mortgage company
Under the agreement reached with Fannie Mae, Coinbase allows borrowers to migrate their digital assets to a Better custody wallet without selling their crypto and initiating taxable transactions. The USDC holders also receive one more advantage: they will be able to receive rewards in the form of stablecoins until their assets can be used as security.
The trade-off is cost. The mortgages have a rate ranging between 0.5 and 1.5 percentage points higher than the normal mortgage loan of 30 years, depending on the profile of the borrower.
No Margin Calls
Among more notable aspects that distinguish this product among the traditional crypto lending the case of a decrease of the market rates of Bitcoin, the conditions of the mortgage will not change and no extra pledge will be necessary. The liquidation risk is not incurred until 60 days after default of payments, indicating conditions which are generally comparable with other traditional mortgages.
However, this is not without precedent. The United States mortgage overseer had directed Fannie Mae and Freddie Mac to prepare to analyze crypto in mortgages in the previous year, and the regulators were motivated to examine the approaches to add digital asset holdings in the mortgage qualification procedure.
In the meantime, mortgage lender Newrez, with a mortgage portfolio of $778 billion, declared earlier this year that it was evaluating Bitcoin and Ethereum as mortgage qualifications in an indication of institutionalization.
The move is likely to attract attention as a gauge of how crypto wealth, which has been regarded to be illiquid compared to the housing market, can be formally incorporated into the systemic lending structure. Assuming that the program is scaled, it would open access to homeownership to a generation of young investors whose wealth is concentrated in digital assets, without having to sell their positions and bear the tax implications of selling their positions.
