Does It Make Sense To Use Bitcoin For Your Mortgage?
United Wholesale Mortgage, the second-largest mortgage lender in the United States, is trailblazing into new territory. Before the end of 2021, they plan to begin accepting cryptocurrency as mortgage payments.
The announcement in August 2021 by CEO Mat Ishbia was cautiously optimistic. He revealed there were no guarantees because the plan was still in the early stages. But he held that as a leader in innovation, UWM was excited to execute the plan.
Capitalizing On Low Mortgage Rates
Ishbia continued that they were looking into cryptocurrency as a means to make monthly payments easier for their nearly one million customers. In this time, when mortgage rates are historically low, mortgage industry volumes are hitting record numbers. UWM reported $59.2 billion in closed mortgages in the second quarter of 2021. This company record was up over $10 billion from the previous quarter.
But lender profits are dropping due to shrinking margins. UWM’s total gain margin fell to 0.81%, a 1.38% drop from the quarter before. Ishbia attributes the decline to a failure to sharpen mortgage pricing during the high-volume business they’ve been experiencing.
He also divulged that refinancing percentages dropped, but new mortgage purchases have increased. Ishbia maintains the refinancing percentages are not a significant concern, as their business model doesn’t rely as heavily on them as they do on new mortgages. And he was optimistic that the $24 billion in second-quarter purchases would balance out the lower profits once rates increase again.
But, with borrowers shopping for the best deals, adding another convenient way for them to make payments makes good business sense.
Not All Cryptocurrencies
Ishbia revealed that UWM would accept Bitcoin—and possibly Ethereum and a few others—but they do not intend to open their market up to every cryptocurrency brand. UWM most likely won’t retain the crypto. Ishbia expressed that they weren’t interested in being crypto investors. Instead, the cryptocurrency will be exchanged immediately on the market for cash. This immediate exchange is intended to avoid additional risk to the mortgage company.
Will borrowers find this innovative payment method an advantage? Crypto is indeed becoming very popular. Bitcoin rose over $50,000 in August. Corporations are beginning to embrace crypto, conferring greater respectability for the currency.
Naomi Brockwell, a tech journalist, is optimistic. While she admits that crypto hasn’t been of much use for making payments, the more substantial amounts that mortgages govern could be a different story.
This early in the process, UWM is a bit light on the specific details of the plan. The current vagueness will, of course, raise questions in borrowers’ minds. How will the lender address exchange crashes when they cause late payments? Or how they will deal with the daily exchange rate fluctuations? Ishbia offered assurances that the plan will be communicated to borrowers once it’s been finalized.