Original author: Micah Zimmerman

Original translation: AididiaoJP, Foresight News

Coinbase is collaborating with Better Home & Finance to launch a Bitcoin mortgage supported by Fannie Mae.

This collaboration marks the gradual integration of digital assets into the traditional housing finance system. The partnership between Coinbase and Better Home & Finance introduces a crypto mortgage supported by Fannie Mae, opening new pathways for the application of digital assets in the housing finance sector.

The innovative product allows eligible borrowers to use Bitcoin or USDC as collateral for their down payment without needing to sell their held digital assets. This move can avoid potential capital gains taxes and allows borrowers to maintain market exposure to their assets.

The aforementioned mortgage is designed as a compliant loan product, with standards and protection mechanisms consistent with traditional Fannie Mae-backed loans. Better is responsible for the initiation and servicing of the loans, while Coinbase provides custody and infrastructure support for the mortgaged Bitcoin and other crypto assets.

The product aims to address a long-standing barrier in the housing market: the upfront capital required for down payments.

According to data from Better, about 41% of American households are unable to purchase a home due to a lack of sufficient liquid funds, even though these households possess other forms of wealth.

Better's CEO Vishal Garg stated, "For decades, the path for Americans to achieve homeownership has been limited to selling assets, cashing out investments, or tapping into retirement savings. This collaboration will provide a new pathway for millions of Americans holding digital assets."

According to a press release from the company, the two companies estimate that around 52 million people in the U.S. have held digital assets, accounting for about 20% of the adult population.

The product allows borrowers to use crypto assets as collateral instead of cash, aiming to optimize their asset balance sheets and facilitate their home purchases.

Bitcoin-Backed Mortgages

Unlike traditional crypto asset-backed loans, this product is designed to minimize the volatility risk faced by borrowers. The related loans do not require additional collateral or margin calls. Even if Bitcoin’s price falls, borrowers are not required to add extra collateral, and simple market fluctuations will not trigger asset liquidation.

Only if a borrower is at least 60 days overdue on their mortgage payments will their collateral face disposal risks. This arrangement aligns with the standard foreclosure processes in traditional housing finance.

Mortgages with a crypto asset-backed structure are expected to have interest rates approximately 0.5 to 1.5 percentage points higher than standard 30-year mortgages, depending on the borrower's situation. Coinbase believes that for borrowers wishing to avoid liquidating assets, this difference in interest rates may be worthwhile.

Max Branzburg, Coinbase's Consumer and Business Product Lead, stated, "Transforming digital wealth into homebuying power is a monumental step. Token-backed mortgages are the first step we are taking to open pathways to homeownership for the younger generation."

This product reflects a shift in wealth holding patterns, especially among young people in the U.S. Coinbase data shows that 45% of young investors hold crypto assets, compared to only 18% among older groups. This indicates that digital assets are gradually becoming the main store of value for a new generation.

Meanwhile, housing affordability continues to worsen. Home price increases have outpaced income growth, leaving many potential homebuyers in a "wealthy in assets but cash poor" predicament. Token-backed mortgages attempt to view crypto assets as usable collateral rather than speculative investments, hoping to bridge this gap.

The Better company has previously explored alternative collateral models. In 2023, the company allowed some Amazon employees to use their stock holdings as down payment collateral. Company executives stated that incorporating Bitcoin and crypto assets will significantly expand loan demand. Garg estimates that had the company launched such products earlier, it might have avoided loan issuance losses of up to $40 billion.

The product structure also introduces new features unique to digital assets. Borrowers collateralizing USDC can continue to earn returns on their held assets, which can be used to offset some of the mortgage costs. Additionally, Coinbase’s custodial model allows users to collateralize only specific portions of their portfolio, without locking up all their assets.

The two companies have stated plans to gradually expand the types of eligible collateral, potentially including tokenized stocks, fixed income products, and real estate assets.

Although crypto asset-backed mortgages have previously existed in limited scopes within specific wealth management channels, Fannie Mae's involvement signifies that such products are moving towards broader application. As a government-sponsored enterprise, Fannie Mae sets standards for a significant portion of the U.S. mortgage market.

By combining Bitcoin collateral with a compliant loan structure, the collaboration between Coinbase and Better positions digital assets as a component of mainstream financial infrastructure, rather than as a separate parallel system.

Coinbase describes this product as "as American as apple pie," and regards it as an evolution in housing financing methods, rather than a departure from traditional models.

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