An analyst warned that crypto asset-backed mortgages pose a major danger in a recent analysis from Weiss Ratings, the only financial rating company that monitors crypto assets.
Concerning the risks of crypto-collateralized mortgages, Weiss, based in Florida, published research on May 2 that looked into the new start-ups that are selling them to consumers. Markman advised consumers to exercise caution before entering the new mortgage market.
Milo, a FinTech company situated in Miami that offers 30-year mortgages guaranteed by cryptocurrency, is one of the novel’s primary protagonists (Bitcoins, Ethereum, and stable coins). On the company’s crypto mortgages, there is no money down and interest rates range from 3.95 percent to 5.95 percent.
Because of the bad performance of crypto assets and the stock market this year, Markman advised clients to exercise caution when applying for a mortgage secured by a crypto asset. The likelihood of a US housing bubble implosion and an increase in interest rates by the Federal Reserve Bank of the United States were both on the table.
He Made The Following Claim:
“If the value of the real estate and bitcoin continues to rise, the offering appears to be a win-win situation… Except that both bets appear doomed to fail in the short future. Bitcoin’s value has dropped by 40% after peaking at $66,000 in November 2021. Rising mortgage rates and a shift in the Federal Reserve’s policy are also placing downward pressure on property prices in the United States.”
According to Markman, the combination of crypto and subprime loans caused the Great Recession of 2009. He was not, however, opposed to all crypto-based threats. As an aside, the Weiss analyst mentioned the 71 percent increase in domestic mortgage interest rates since January.
Last month, CEO Josip Rupena told Barron’s that Milo had worked with 700 potential borrowers to get them approved and had made $5-$10 million in loans. Rupena further stated that the company is presently taking USD Coin, Gemini Dollar, and Terra stable coins, all of which are worth one dollar.
Figure Lending and Len, two firms that offer crypto-backed mortgages and have a waiting list, are featured in Barron’s study.
According to the findings of the poll, crypto loans may be easier to process than bank loans. Milo claims that a loan can be closed in two to three weeks and that no FICO credit check is required. To comply with “know your customer” standards, there are minimal documentation requirements; however, the business relies on identification and source of money verifications.