Not too long ago, we reported on United Wholesale Mortgage and its eye-catching plan to accept cryptocurrencies for mortgages by late 2021.
As we wrote then:
Whether the idea will find adherents remains to be seen. Certainly, many UWM customers are big crypto holders. But that doesn’t mean they want to part with their digital assets.
OK, now it’s late 2021. And indeed, while the idea got a flurry of attention, UWM has abandoned it. CEO Mat Ishbia said borrowers thought it was a “cool” idea, but there was “not enough demand at the end of the day” to keep it going after an initial test. The six borrowers who participated in September and October 2021 may now owe taxes for paying in digital assets rather than cash.
Never mind.
Other Real Estate Platforms Experimenting With Cryptocurrencies
Meanwhile, the concept of shares in real estate might be better suited to take cryptocurrency payments. Pacaso®, co-founded by former Zillow CEO Spencer Rascoff, aims to create “a marketplace that makes buying, owning, and selling a luxury second home easy.” And the company is now working cryptocurrency into the payment options.
But first, what is this marketplace?
People who own second homes typically use them only a month or two out of a year, if that much. It’s not a very cost-effective use of real estate. Some owners buy second homes together, as a shared investment, but things can get awkward when one of them needs to sell. Pacaso simplifies the set-up. It showcases luxury homes for sale, and assists in the formation of LLCs for the properties. Pacaso then provides a booking platform so the owners can optimize their use of the property. The co-owner only buy in partly, together with Pacaso. So, the co-owners they can sell when they wish. Pacaso gets a 10% fee when a house is bought, and charges 1% yearly to handle normal costs, logistics and maintenance. It’s similar to a timeshare concept, but with homes.
Now for the cryptocurrency part. Pacaso is also a digital lender that’s opted, as announced in October 2021, to accept cryptocurrency for co-buyers of shares in second homes. They’ll do this in collaboration with BitPay, an international service focused on blockchain payment tech. Co-owners will have the option to invest in shares of real estate with bitcoin, ether, Litecoin, USD-pegged stablecoins, and several other cryptocurrencies.
BitPay, a 10-year-old company — already a veteran along the crypto timeline — is developing ways for finance companies to avert the risks presented by fraud, to ratchet down payment processing costs, and to create a user-friendly system for worldwide payments.
And So the Story Continues…
While time is likely to change the dynamic, volatility is still the hallmark of the leading cryptocurrencies. Using them for one-time transactions (or simply holding onto them) makes more sense than using the assets to pay a monthly bill. If a borrower sets crypto mortgage payments to go through automatically, the value of payments could differ dramatically month-to-month. Taxes on transactions with crypto assets only complicate the matter further.
It’s not unusual today for home buyers to keep 5% of their wealth in bitcoin or another cryptocurrency for the sake of diversification. So, as NextAdvisor points out, while cryptocurrency mortgage payments might not be ready for prime time, lending institutions could regard digital accounts as stores of value to be factored into the ability to repay loans.
United Wholesale Mortgage says the mortgage payment test wasn’t a waste. It educated the firm, putting it in a better position to work with cryptocurrency when the time is ripe.
We’ll keep our readers posted.
Supporting References
REALTOR® Magazine: Lending Giant Stops Accepting Bitcoin for Mortgages (Oct. 18, 2021; citing CNBC).
Helen Partz for CoinTelegraph.com: Second-Largest U.S. Mortgage Lender UWM Dumps Bitcoin Payment Plans (Oct. 15, 2021).
JC Reindl for the Detroit Free Press: UWM Sees Business Growth, Says It Plans to Start Accepting Bitcoin for Mortgage Payments (Aug. 16, 2021).
Megan DeMatteo for NextAdvisor, via Time.com: Paying Your Mortgage With Bitcoin Is a Bad Idea. Here’s Why (Oct. 26, 2021).
Pacaso, via Cision (PR Newswire): Pacaso to Accept Cryptocurrency Payments for Purchases of Second Homes (Oct. 20, 2021).
Taylor Soper for GeekWire.com: Ex-Zillow CEO Spencer Rascoff Jumps Back Into Real Estate, Launches Startup With former Colleagues to Help People Buy Second Homes (Sep. 30, 2020).
And as linked. Photo credit: newhouse, via Pixabay.