In a shift for both the housing and cryptocurrency industries, Fannie Mae announced this week that it will accept crypto-backed mortgages for the first time.
The new product, developed in partnership with mortgage lender Better Home & Finance and crypto exchange Coinbase, allows homebuyers to use their crypto assets as collateral, rather than selling them to raise cash for a down payment. The significance of the announcement lies less in the product itself and more in who is blessing it: Fannie Mae backstops a massive share of American mortgages, and its underwriting decisions ripple across the entire lending industry.
Under the structure, a borrower takes out two loans — a standard conforming mortgage with Better Home & Finance, and a second loan backed by either Bitcoin or USD Coin (USDC) to fund the down payment on the first. The token-backed mortgages are free of margin calls, meaning if the value of Bitcoin drops, the mortgage terms remain unchanged and no additional collateral is required. Borrowers’ collateral is only at risk of liquidation in the event of a 60-day payment delinquency, similar to conventional mortgages. Rates for the crypto-backed mortgages will be higher than a standard 30-year loan by between half a percentage point and 1.5 percentage points.
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