Crypto mortgages are the most recent evidence of digital coins’ growing significance in the US real estate industry, with property buyers and lenders alike adopting the volatile currency to underpin physical asset transactions.
Fannie Mae began allowing borrowers to use cryptocurrency for down payments last year. Digital currencies are being accepted as deposits on condos in new buildings being built in IT hotspots like Miami. Earlier this year, a property in Tampa, Florida, was even sold as an NFT.
Milo Credit is another Miami-based firm looking to tap into the growing pool of crypto devotees looking to diversify their portfolio while keeping their tokens. Milo’s home loans are a unique offering. Borrowers pledge their digital assets as security instead of simply paying for property with tokens, with no down payment required. This allows holders to keep their coins while avoiding capital gains taxes and theoretically profit from increased token and real estate values. It also increases risk by financing purchases with a volatile asset at a time when the hot US real estate market is slowing due to the sharpest rise in borrowing costs in decades.
According to CEO Josip Rupena, Milo hopes to make such loans a large business by pooling them and selling them to banks, asset managers, and insurance firms, as well as maybe offering them as bonds in a securitization. The novel has already piqued the interest of Wall Street’s financial engine.
The financial engine of Wall Street is already looking into the revolutionary mortgages. Steve Blevit, a lawyer at law firm Sidley Austin who specialises in financing exotic assets, said, “We’ve advised on various situations involving the origination of loans backed by crypto and NFTs for ultimate securitization and related concepts.” “This area is generating a lot of interest, and we expect it to grow into a new asset class.”
Until now, those with substantial crypto holdings who didn’t want to sell had to rely on organisations like BlockFi, which provides collateralized loans that can be used to purchase real estate. Unchained Capital, situated in Austin, Texas, offers three-year loans with interest rates as high as 14%. Milo, which began originating house loans for non-US nationals in 2019, now offers a product that resembles a typical mortgage. If the company’s wait list of over 8,000 customers eager to buy property in regions like Texas, California, and New York is any indicator, its crypto offering could outperform its US$100 million in foreign national loans.
In the last 30 days, the business has given pre-approval letters on mortgages worth US$340 million. Milo just obtained US$17 million in Series A funding from M13, a venture capital firm, to assist drive its expansion. Rupena added, “We’re going to develop this and make it bigger.” “In addition to mortgages, Milo will try to provide other long-term solutions to folks with crypto money.” It’s the kind of ambitious goal that’s sweeping the crypto economy and Milo’s hometown of Miami, where the decentralised finance culture is quickly taking hold. Bored Ape NFTs, who gained mainstream appeal thanks to Snoop Dogg and Justin Bieber, hang out on building facades and telephone poles in the city’s Wynwood neighbourhood. Between old warehouses destined to be inundated by employees of Blockchain.com and MoonPay, cranes dot the skyline.
Even while the value of digital assets has expanded over the last decade, reaching almost US$2 trillion, breaking into the decades-old, highly regulated mortgage market remains a major hurdle. Skeptics point to the volatility of cryptocurrencies: Bitcoin notably gained 305% in 2020, but is now down more than 40% from its all-time high. Ether and other altcoins have also seen significant price drops. Government authorities have also raised concern about the lack of regulatory monitoring and surveillance that can lead to fraud and other issues with cryptocurrency. Supporters are adamant, claiming that the tokens will establish their worth over time. Since the end of 2019, Bitcoin has increased by about 500%.
