Fannie Mae to accept first cryptocurrency-backed mortgages

March 26 (UPI) — Fannie Mae on Thursday agreed to begin accepting mortgages that are backed using cryptocurrency.

The mortgages will be offered by Coinbase and Better Home & Finance, which said the creation of what it calls a first-of-its-kind cryptocurrency-backed mortgage product could allow more Americans to afford homeownership.

Although there are companies already offering mortgages backed with crypto-assets, this is the first that Fannie Mae, and its federal conservator, the Federal Housing Finance Agency, has opted to back.

“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 downpayment,” Max Branzburg, head of consumer and business products at Coinbase, said in a press release.

Qualifying for a mortgage is based on income history, credit profile and cash savings, however Coinbase and Better have devised a method using cryptocurrency that would allow holders of the digital assets to use them to secure loans without having to sell them, the companies said.

Rather than selling crypto-holdings to convert them to cash — which potentially would trigger capital gains taxes — companies allow borrowers to pledge crypto-holdings as collateral for a separate loan to cover the down payment on a property.

The process means that buyers would actually have two loans: a standard Fannie Mae mortgage paired with a separate loan based on the cryptocurrency for the downpayment.

The borrower’s crypto-holdings stay in Better’s Coinbase Prime account for the life of the loan, and are then returned to the buyer when the down payment loan is paid off, the companies said, while mortgage terms will remain unchanged even in the event of cryptocurrency price volatility.

Both loans are held by Better, so borrowers make one payment per month.

“This partnership with Coinbase introduces a new pathway to realizing the American Dream or the 52 million Americans who own digital assets,” Vishal Garg, CEO and founder of Better, said in the press release.