The second largest mortgage lender in the country seeks to provide borrowers with the ability to pay mortgage loans in Bitcoin by the end of the year. United wholesale mortgage says it will be the first US mortgage company to accept cryptocurrency in exchange for monthly payments.
“UWM plans to accept Bitcoin because we have almost a million consumers paying us their mortgage payments every month and we are always trying to find a way to make life easier for our customers,” says Mat Ishbia, chairman and CEO of the company. …
The move raises familiar questions about cryptocurrency and whether this virtual money can function as a medium of exchange in addition to its famous role as a vehicle for speculation. Financial experts do not expect people to pay mortgages this way.
“It’s nice to know that individuals can pay off mortgages with cryptocurrency, but due to operational concerns for the individual investor, I think very few will do that,” says Clark Kendall, financial advisor who runs Kendall Capital Management in Rockville, State. Maryland.
How will Bitcoin mortgage payments work?
United Wholesale Mortgage is the # 2 mortgage lender in the country. More than 560,000 loans were disbursed in 2020, according to Rocket Mortgage. Banking analysis of data from the Federal Law on Disclosure of Information on Housing Mortgages…
Ishbia says United Wholesale Mortgage will open by accepting Bitcoin, the most famous cryptocurrency. Its total market value is approaching $ 1 trillion.
Ishbia said that his company is going to take other virtual coins also. He did not name names, but Ethereum, Cardano, XRP, and Litecoin are some of the most ubiquitous cryptocurrencies.
United Wholesale Mortgage has not released any details on how the payout might work. Will consumers pay from Coinbase or other cryptocurrency brokerage accounts? It is not clear.
The company is still working on these issues with the federal authorities. “A lot of the work in such a highly regulated industry is that we can work directly with regulators to ensure that we are doing everything right before changes such as crypto adoption happen,” Ishbia says.
Bitcoin volatility complicates things
Bitcoin has been the subject of increased interest in the past year and its price has changed accordingly. In September 2020, one bitcoin was worth just over $ 10,000. By April 2021, the price was flirting with $ 65,000.
A few months after reaching this high point, Bitcoin dropped below $ 30,000. It is growing again, approaching $ 50,000. This roller coaster ride is the opposite of the stability that is the hallmark of major currencies such as the dollar and euro.
Bitcoin’s volatility poses a number of problems. First, there is a mismatch between the payment of a debt denominated in a stable currency and a medium of exchange that fluctuates in price.
“If your monthly mortgage payment is $ 1,000, are you sending bitcoins of $ 800 or $ 1,200 as payment this month?” Kendall asks.
Greg McBride, chief financial analyst at Bankrate, is also wary. “I would not recommend basing your confidence in next month’s mortgage payments on the price of the stock you own now, and certainly I would not recommend basing this on a speculative asset,” he says.
The value of bitcoin can change so dramatically that borrowers may even worry about a jump in value between the moment the payment is made and the moment it is credited to the account.
For true Bitcoin believers, the concept of using cryptocurrency to pay bills is counter-intuitive. If you think Bitcoin’s value will skyrocket to $ 100,000, why would you use it to pay off your mortgage when boring old dollars can do the same thing?
Tax issues can be tricky
Taxes are another stumbling block. While tax policy regarding cryptocurrency is under development, The IRS considers the use of cryptocurrency to buy something or pay expenses as a potentially taxable event.… Thus, the seemingly simple act of exchanging bitcoins to pay off a mortgage could result in capital gains tax, according to the American Institute of Certified Public Accountants.
“I could only see recommendations to use cryptocurrency to pay off debt if the investor wanted to get rid of their cryptocurrency and pay off their mortgage in full,” Kendall says. “Using cryptocurrency for monthly mortgage payments doesn’t make any practical sense in my book.”