Crypto mortgage product allows borrowers to post bitcoin as collateral

Crypto mortgage product allows borrowers to post bitcoin as collateral
Written by Publishing Team

Milo Credit, a Miami-based venture-backed financial technology company, has unveiled a Cryptocurrency Mortgage, which allows bitcoin holders the opportunity to benefit from 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 giving waitlisted customers early access and expects to open more in early 2022.

In the loan process, the borrowers pledge the full value of the purchase of their holdings in bitcoin to be used as leverage. As financier of the entire loan, Milo is not asking for a down payment in dollars, said Josep Robina, the company’s founder and CEO. The design allows clients to maintain the value of their digital assets while diversifying into real estate.

“We are looking at their cryptocurrency that they have, as well as other factors that we have in our underwriting, but they don’t have to come in with dollars,” Rubina said in an interview with National Mortgage News. “This allows them to not go out in the traditional world and sell their crypto.”

Josep Rubina, Founder and CEO of Milo Credit

In the United States, cryptocurrency was meet with caution By some regulators, its acceptance into the mortgage industry has come on and off. In the December guidance, Freddie Mac said that cryptocurrency cannot be included in an asset account as a basis for paying off liabilities. last year, United Wholesale Mortgage has announced that it will begin accepting Bitcoin, Ether and Dogecoin to pay off the mortgage, then immediately discontinue the option after a few weeks, citing low interest. Altisource It also said that it will allow the cryptocurrency to be used for certain payments in October through an external seller, which transfers assets before transferring funds.

David Sacco, a practitioner in residence at the University of New Haven’s Finance Program, said that cryptocurrency activity has lasted long enough that it is likely to remain an investment tool, but its widespread use in commercial transactions is still at least a decade away. . “I would define cryptocurrencies as a speculative store of wealth,” he said.

Its volatility involves significant risks for companies to accept on a regular basis. The value of cryptocurrencies has been very volatile since it was first introduced in 2009. In 2021 alone, the value of a single bitcoin ranged from a low of near $30 thousand to a high of around $68 thousand.

“For any currency to have value as a medium of exchange, you and I need to immediately determine the value of something in that cryptocurrency,” Sacco said. “And we haven’t gotten there yet.”

Unlike UWM and Altisource, Milo uses the received bitcoin as collateral without selling or transferring the asset, although customers can choose to make their payments in bitcoin or dollars. As a direct lender that spends all funds on settlement, Milo’s role is as a bridge between buyers who want to use cryptocurrency and sellers who prefer cash, Robina said.

The initial amount pledged mitigates Milo’s risk, giving them the ability to tap liquidity if needed for missed payments. Milo also developed precautions to protect himself from the fluctuations.

“if [bitcoin value] A certain percentage goes down, that will trigger a margin call or warn the consumer to pledge more, and if they don’t, we will create a risk balancing mechanism,” said Rubina.

Founded in 2019, Milo’s primary line of business has to date been a provider of financial solutions to foreign investors and buyers looking for real estate in the United States. But its crypto product is open to both US and international customers. Bitcoin is currently the only accepted digital asset, but Rubena expects others to follow.

“We receive a lot of demand for other digital assets. We will deliver to others over time, but all of this is really driven by consumer demand.” According to Robina. Milo’s offering should allow investors to capitalize on the potential gains of both digital assets and real estate,

“At the end of the day, if they want to keep holding bitcoin, it’s because they are long-term believers that they will appreciate it, and if they want to invest in real estate, they are likely to do the same,” he said. “So we want to make sure that we give them a solution on this.”


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