“Were going to refine this and get it bigger,” said Rupena, 38. “Milo will be looking to provide other long-term solutions to those with crypto wealth — not just mortgages.”
It’s the type of lofty ambition rippling through the crypto economy and Milo’s hometown of Miami, where the culture of decentralized finance is fast taking root. In the city’s Wynwood neighborhood, Bored Ape NFTs, which grew in mainstream popularity with the help of Snoop Dogg and Justin Bieber, hang out on building facades and telephone poles. Cranes dot the skyline in between old warehouses about to be inundated by employees of Blockchain.com and MoonPay.
Even as the value of digital assets has exploded over the last decade, standing now at about $2 trillion, it’s a big challenge to cross into the decades-old, highly regulated mortgage industry. Skeptics point to cryptocurrencies’ volatility: Bitcoin infamously soared 305% in 2020 but is down more than 40% from an all-time high. Ether and other altcoins have also suffered steep declines. Crypto has also attracted attention from government officials who have expressed concern about the lack of regulatory oversight and surveillance which can come with fraud and other problems.
“There are always early adopters out there trying new things,” said David Lykken, president of Transformational Mortgage Solutions, a consulting and advisory firm. “Cryptocurrency doesn’t have enough stability or the confidence of the broader investor community. Certainly not now — maybe never.”
Supporters remain steadfast, arguing the tokens will prove their worth in time. Bitcoin has still gained almost 500% since the end of 2019.
Milo is lending as much as $10 million on homes, and digitizing the process so closing takes two to three weeks. Borrowers must pledge at least the amount of the property, and the coins get transferred to a custodian for safe keeping.
The property seller gets paid in dollars funded by Milo. Borrowers can then make their monthly payments in either crypto or traditional cash. Rates are generally between 3.95% and 5.95%, which is in line with the average borrowing costs for a traditional 30-year mortgage.
To account for the volatility, Milo will ask the borrower to put up more crypto or cash if the crypto-to-loan amount drops below 65%. If that figure drops below 30%, the company liquidates the assets and stores them in U.S. dollars.
It’s an especially big risk to take for an asset as personal as a home, said John Kerschner, head of U.S. securitized products for Janus Henderson Investors.
“A crypto mortgage seems inefficient given the volatility,” he said. “People think Bitcoin will go to the moon but nobody thought the great financial crisis or Covid was coming. These things happen.”
Burniske, who used his mortgage to buy investment properties, already has tenants living in his four units, nestled between a 1920s Venetian pool and the Biltmore Hotel in what’s known as Golden Triangle of Coral Gables. For him, the crypto mortgage is just another example of a concept that quickly turns real.
“I was convinced I was going down the conventional loan path,” he said. “It’s comfortable. It’s what we know. But at any given moment there are better financing options and you really need to pay attention.”
This article was provided by Bloomberg News.