Coinbase and Better Home & Finance Holding Company have funded the first Fannie Mae-backed mortgage using bitcoin as collateral and plan to make the product available to qualified borrowers nationwide by the summer.
The product, first announced in March, is designed to allow homebuyers to use their crypto holdings toward a down payment without selling their digital assets. Initially, the product supports bitcoin and the USDC stablecoin, with plans to add more digital assets over time as the market matures.
Coinbase and Better have now closed the first such loan for Joe and Amy, a married couple in their early 30s from Ann Arbor, Michigan. Joe, a software engineer, and Amy, a graduate student, had built savings in digital assets but lacked enough cash for a traditional down payment, the companies said. Rather than selling their bitcoin, paying capital gains taxes, and giving up potential future upside, Joe and Amy pledged their bitcoin as collateral and purchased their first home.
"At Coinbase, we believe that bitcoin should do more than sit in a wallet. It should work for the people who hold it," said Mark Troianovski, head of consumer & platform partnerships at Coinbase. "Funding the first token-backed conforming mortgage is one of the most tangible demonstrations of that vision that we have seen."
How the mortgage works
The structure involves two loans that close simultaneously. The first is a standard Fannie Mae mortgage identical to a conventional conforming mortgage, while the second is a separate crypto-backed loan that funds the down payment, a Coinbase spokesperson told The Block.
For example, a borrower purchasing a $500,000 home could obtain a $400,000 Fannie Mae mortgage and use a separate $100,000 crypto-backed loan for the down payment. To secure that down payment loan, the borrower would pledge around $250,000 worth of bitcoin as collateral. That's because the collateral pledge ratio for bitcoin-backed loans is roughly 2.5-to-1. For USDC-backed loans, the ratio is 1.25-to-1.
While there are technically two loans, Better structures them so borrowers experience them as one, the spokesperson said. Both loans share the same interest rate and amortization schedule, resulting in a single monthly payment.
Maximum loan sizes follow standard Fannie Mae conforming loan limits, which vary by region, the spokesperson said, adding that the product offers both 15-year and 30-year fixed-rate mortgage terms.
The pledged crypto remains in custody for the duration of the loan through Better's custodial account on Coinbase's platform, the spokesperson said.
Demand for the product has already been strong ahead of the nationwide launch. The spokesperson said the waitlist currently represents around $250 million in potential loan volume, with more than half of interested borrowers looking to purchase a home within six months.
Around 76% of waitlist borrowers are already Coinbase users, the spokesperson said, noting that California, New York, and Florida currently represent the top three states of interest to prospective borrowers.
Better, which has funded more than $110 billion in loans to date, said that 41% of its pre-approved customers qualify based on income and credit but do not have enough cash for a traditional down payment. The company said crypto-backed mortgages provide a new path to homeownership for those borrowers.