Crypto Mortgage Product Allows Borrowers to Deposit Bitcoin as Collateral

Milo Credit, a Miami-based fintech, unveiled a cryptocurrency mortgage, which allows bitcoin holders to mine the value of digital assets without converting them into dollars.

Milo Credit started developing the product last year after many requests from buyers and investors looking for a crypto loan product. The company is currently granting early access to customers on the waitlist and plans to open it more in early 2022.

In the loan process, borrowers agree to use the full value of their real estate purchase in bitcoins as leverage. As the funder of the entire loan, Milo does not require any dollar down payments, said company founder and CEO Josip Rupena. The design allows clients to retain the value of their digital assets while diversifying into real estate.

“We’re looking at their crypto that they have, and other factors that we have in our underwriting, but they don’t have to come up with dollars,” Rupena said in an interview with National Mortgage News. “It allows them to not have to go out into the conventional world and sell their crypto.”

Josip Rupena, founder and CEO of Milo Credit

In the United States, cryptocurrency has been met with suspicion by some regulators, and its acceptance in the mortgage industry has been bumpy. In his December guidelines, Freddie Mac said cryptocurrency could not be included in the calculation of assets as a basis for bond repayments. Last year, United Wholesale Mortgage has announced that it will start accepting bitcoin, ether and dogecoin for mortgage payments, then quickly dropped the option after a few weeks, citing a low interest rate. Altisource also said it would allow cryptocurrency to be used for certain payments in October through a third-party provider, which converts assets before transferring funds.

The cryptocurrency business has been around long enough that it’s likely to remain an investment tool, but its widespread use in business transactions is at least a decade away, said David Sacco, a practitioner-in-residence at the program. finance from the University of New Haven. . “I would define cryptocurrencies as a speculative store of wealth,” he said.

Their volatility carries too much risk for companies to accept on a regular basis. The value of cryptocurrencies has been marked by wild fluctuations since their introduction in 2009. In 2021 alone, the value of one bitcoin ranged from a low of nearly $30,000 to a high of around $68,000. dollars.

“For a currency to have value as a medium of exchange, you and I need to be able to instantly determine the value of something in that cryptocurrency,” Sacco said. “And we’re not there yet.”

Unlike UWM and Altisource, Milo uses bitcoin received as collateral with no sale or conversion of the asset, although customers can choose to make payments in bitcoin or dollars. As a direct lender, disbursing all funds for settlement, Milo’s role is to act as a bridge between buyers who want to use cryptocurrency and sellers who prefer to be paid in cash, Rupena said.

The upfront amount pledged mitigates Milo’s risk, giving them the flexibility to tap into his cash if needed for missed payments. Milo has also developed safeguards to protect against volatility.

“Yes [bitcoin value] goes down a certain percentage, it will trigger a margin call or a warning to the consumer to commit more, and if they don’t, we will create a mechanism to balance the risk,” Rupena said.

Founded in 2019, Milo’s primary business to date has been providing financing solutions to overseas investors and buyers looking for properties in the United States. But its crypto product is open to US and international customers. Bitcoin is the only digital asset currently accepted, but Rupena expects others to follow.

“We get a lot of requests for other digital assets. And we will come up with more over time, but it really all depends on consumer demand,” he said. According to Roupena. Milo should allow investors to benefit from the potential gains of digital assets and real estate,

“At the end of the day, if they want to continue to hold bitcoin, it’s because they believe in the long term it’s going to appreciate, and if they want to invest in real estate, it’s more likely that ‘they do the same thing,” he said. “So we want to make sure that we offer them a solution on that.”

Comments are closed.