Crypto industry moves into the US housing market
The crypto market and its many supporters have been pushing regulators in this direction for several years, raising concerns among consumer advocates that this lightly regulated and highly volatile investment asset is being tied to something as vital to the economy as the housing market.
Advertisement
And Trump has gone from a crypto critic to a big booster.
'In a world where regulatory enforcement has been largely taken off the table, the boundaries are getting pushed very quickly,' said Tyler Gellasch, a former lawyer at the Securities and Exchange Commission, who runs the Healthy Markets Association, a financial industry trade group.
Advertisement
But from homebuyers and crypto enthusiasts, there is growing demand. In a recent survey, roughly 14 percent of homebuyers said they planned to sell crypto assets to help get the cash to cover a down payment on a home, up from 5 percent in 2019, according to Redfin, the residential real estate brokerage company.
In 2017, David Doss sold some of his crypto holdings to raise cash for the down payment on a home in New Jersey. He said he would have preferred that there had been a way to keep his crypto while getting the cash equivalent but that option didn't exist when he bought his house.
'The intersection of crypto and real estate is evolving pretty darn quickly,' said Doss, who advises wealthy investors on crypto investing. 'It's a meeting of the oldest asset class with one of the newest.'
Pulte's order might have allowed Doss to keep some of his crypto holdings. It says that homebuyers no longer have to sell their crypto for cash as part of the process of qualifying for a mortgage.
Crypto is gaining traction in the housing market as home sales have stagnated, leaving many unable to sell or buy a home or tap into their home's equity through loans.
Several startups are already pitching crypto as a way to cut through the market's current morass and jump-start home sales.
One firm, Milo, founded by Josip Rupena, a former financial adviser at Morgan Stanley, offers investors a way to use bitcoin as collateral for getting a home mortgage.
For a $1 million home, an investor posts $1 million worth of bitcoin, which Milo puts into a secure account. The firm provides $1 million in cash to buy the home.
Advertisement
Milo then writes an equivalent mortgage that the homebuyer is ultimately responsible to pay off. The interest tends to be a few percentage points higher than a normal mortgage, but the customer gets the benefit of not having to sell any crypto or pay capital gains. When the mortgage is paid off, Milo returns the bitcoin to the investor.
Rupena said he had already underwritten $65 million of such mortgages, and he welcomed the FHFA's policy shift on crypto.
Unlike most bank mortgages — like the ones Fannie and Freddie buy — Rupena's firm does not require a homeowner to make a down payment. His firm finances 100 percent of the transaction, which most banks will not do and that is not likely to change with the new FHFA rule on crypto.
'This is the first step in getting crypto parity with other assets,' Rupena said of the FHFA decision.
Other firms are helping homeowners' tap their home's equity to buy crypto. The strategy is similar to so-called home equity investment contracts, which provide lump-sum cash payments to a homeowner in return for the right to share in the appreciation in a home's value.
But instead of the homeowner using cash from the deal to pay for home improvements or a child's college tuition, they are using it to buy only one thing: bitcoin.
'Turn your home into a bitcoin acquisition engine,'' one of the startup firms called Horizon, said in a post on the social media platform X.
Here is how it typically works: Some of the firms loan the homeowner cash to buy bitcoin based on the value of the equity in their homes. The firms typically make money by sharing in the appreciation in the value of a house when an owner sells it.
Advertisement
The deals are attractive because the homeowner does not need to make monthly payments during the life of the agreement, as they would with a traditional home equity loan.
As protection, some of the firms also place a lien on a house during the length of the contract — some of which can last for a decade.
Horizon debuted its offering at the bitcoin conference last month in Las Vegas, where two of Trump's sons were headline speakers.
Consumer advocates see reason for concern.
'My general impression is that taking any lien on your house to buy crypto is a terrible idea,' said Andrew Pizor, a senior attorney at the National Consumer Law Center, who specializes in mortgage financing. 'This is the roof over your head, and you have to be cautious.'
All of these programs are in their infancy, so it's too soon to say how much traction they will ultimately get.
Representatives for the companies said concerns about consumers being taking advantage of were overstated. Most prospective customers are wealthy investors. The firms also said they intended to be compliant with existing federal and state laws.
Harry W. Prahl, 35, who has been investing in bitcoin since 2016, said he was interested in tapping the equity in both his home and in several apartment buildings he owned to buy more of the crypto currency.
Prahl has been talking to a company called Sovana, which was founded by a former Google executive, about using some of his real estate holdings as collateral to buy more bitcoin. Sovana would buy bitcoin, using a formula based on the equity in a person's properties, and then put the crypto currency into a secure account. At the end of the deal, the person and the company would share the profits.
Advertisement
If bitcoin drops in value, the property owner must make up the deficiency.
'It's an alternative way to tap into that commercial equity that doesn't affect the business,' Prahl said. 'And not having to make any payment is a real killer feature.'
Although the details of the FHFA's policy shift are scare, on its face it signals a shift in how the Trump administration is overseeing Fannie and Freddie. Under past administrations, the two firms have tended to be risk averse after nearly collapsing during the financial crisis when millions of homeowners defaulted on their mortgages.
In a post on X about the new policy, Pulte said he made the decision for Fannie and Freddie to count crypto among homebuyers' assets after 'significant studying.'
He added that it was in 'keeping with President Trump's vision to make the United States the crypto capital of the world.'
This article originally appeared in
.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
a minute ago
FTC sues LA Fitness operators for 'exceedingly difficult' gym cancellation policies
NEW YORK -- The U.S. Federal Trade Commission is suing the operators of LA Fitness, over allegations that they make it 'exceedingly difficult' for consumers to cancel gym memberships and other related services offered in their clubs nationwide. In a Wednesday complaint, the FTC accused Fitness International and its subsidiary Fitness & Sports Clubs of illegally charging consumers 'hundreds of millions of dollars in unwanted recurring fees' as a result of cumbersome cancellation processes. The agency said that tens of thousands of customers have reported difficulties with these policies to date. 'The FTC's complaint describes a scenario that too many Americans have experienced — a gym membership that seems impossible to cancel,' Christopher Mufarrige, director of the agency's Bureau of Consumer Protection, said in a statement. Beyond LA Fitness, California-based Fitness International operates brands like Esporta Fitness, City Sports Club, and Club Studio — spanning across more than 600 locations with over 3.7 million members nationwide. And the FTC pointed to two 'unfair and unlawful' cancellation processes that it says these gyms have used for years: in-person cancellation or cancellation by mail. Both of these options require consumers to print out a form on the gym's website, which includes logging in with credentials that the agency says some customers don't have or remember. And if a customer opts for in-person cancellation, there's limited hours and often difficulty finding a manager to process the forms, the complaint notes — while mailing the form comes with additional costs. 'Each of these cancellation methods is opaque, complicated, and demanding — far from simple,' the FTC writes in its complaint. It also alleges that the company doesn't adequately disclose cancellation offerings when consumers sign up for memberships, and that some will be signed up for additional services with recurring charges without realizing there may be different cancellation requirements. According to the FTC, Fitness International now offers website cancellations for subscriptions 'with stand-alone agreements' — but the agency said the process 'still imposes unnecessary burdens' on customers and claims that that option is buried online. It's also still not possible to cancel memberships on the company's mobile apps, the FTC added. Fitness International did not immediately respond to The Associated Press' request for comment on Wednesday. This isn't the first time that federal regulators have accused gym operators — and other companies with subscription services — of making their cancellation processes too difficult for consumers. Under the Biden administration, the FTC adopted a 'click to cancel' rule, which would have made it easier for consumers to end unwanted subscriptions. But last month, days before that rule was poised to go into effect, a federal appeals court blocked the proposed changes.
Newsweek
a minute ago
- Newsweek
Bed, Bath & Beyond CEO Raises Eyebrows After Rejecting California Expansion
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. Bed, Bath & Beyond CEO Marcus Lemonis is facing backlash and being mocked, along with garnering praise from some conservatives, after announcing Wednesday that the company will not open retail stores in California. Lemonis' statement said, in part, "This decision isn't about politics — it's about reality. California has created one of the most overregulated, expensive, and risky environments for businesses in America. It's a system that makes it harder to employ people, harder to keep doors open, and harder to deliver value to customers." The statement continued, "The result? Higher taxes, higher fees, higher wages that many businesses simply cannot sustain, and endless regulations that strangle growth. Even when the state announces a budget surplus, it's built on the backs of ordinary citizens who are paying too much and businesses who are squeezed until they break." Bed Bath & Beyond, once a dominant home goods retailer, filed for bankruptcy in April 2023 after years of declining sales and mounting debt. Its brand was later acquired by which has since rebranded itself under the Bed Bath & Beyond name as an online-only retailer. California Democratic Gov. Gavin Newsom's office posted on X, "After their bankruptcy and closure of every store, like most Americans, we thought Bed, Bath & Beyond no longer existed. We wish them well in their efforts to become relevant again as they try to open a 2nd store." Political scientist Norman Ornstein said on X, "Is this the same Bed Bath & Beyond that drove itself into bankruptcy?" California Republican Rep. Jack Kimble wrote on X, "And this is why California must change its labor laws. They drove Bed Bath and Beyond to close all their stores nationwide in 2023. I know, you're my state but do better, California." The conservative LibsofTikTok account posted on X, "Marcus Lemonis, the Executive Chairman for Bed Bath & Beyond, just announced that his company will NO LONGER OPERATE in California: Welcome to Gavin Newsom's California." This is a breaking news story. Updates to follow.
Forbes
28 minutes ago
- Forbes
How 'Insurtech' Can Adapt To Serve America's Demographics Better
In these times of economic crisis and uncertainty, people often invest in life insurance, expanded health insurance and other risk-management investment vehicles. And yet today, America's life insurance markets may not be serving the very demographics that growing in the United States today and in the near future. The result is a mismatch between the insurance coverage that people need and the actual risk they are facing. As we know, America's demographics are skewing older and less white. Some estimate that the United States will be majority-minority by as early as 2045 – just 20 years away. According to the American Association of Retired Persons (AARP), nearly 34% of Americans are over the age of 50 - a number expected to hit 40% by 2030 or so. In addition, America's non-white population has almost doubled over the past four decades, growing from about 24% of the population in 1990 to over 40% in 2023. The ramifications of this on our political system will be enormous, as resources shift from traditional priorities to those of a changed population. Medicare, a program for the elderly to receive health care benefits, currently serves 70 million Americans and is expected to serve nearly 90 million people by 2050. Recent legislation, like the OBBBA, reduces funding for Medicare as well as important health care research to improve our quality of life and life span. Indeed, possibly over a trillion dollars will be cut from Medicare. In addition, recent changes to immigration policy reduce the ability of immigrants to secure health insurance, employment and live a long life in the United States. This is a time for the insurance industry to step up and provide greater insurance and assurance to society – whether its life insurance, health insurance. Looking at life insurance specifically, millions of Americans have coverage—yet few truly understand what they own, and even fewer take the time to review it. Although life insurance may sound like a simple financial product, it is not. In a $1.2 trillion industry where 60 percent of Americans have insurance, the vast majority of policies are 'sold,' not 'sought,' and most consumers have no idea whether what they purchased is the best value available or if the options they were offered were truly in their best interest. America's aging population is creating record demand for retirement planning, LTC coverage, and legacy tools like life insurance—but the industry hasn't evolved with these demographic shifts. Financial literacy is low, and insurance literacy is even lower. Furthermore, minority, immigrant, and first-generation households are often disproportionately sold unsuitable policies due to language barriers and sales-driven practices. Today, only 45 percent of Hispanic American families have life insurance, and there is little transparency on how many of those policies could be improved through a simple independent review to provide greater coverage, enhanced benefits, or lower costs for the same premiums. John Nguyen, author of Life Insurance Confidential – Don't Let Yourself Own a Bad Policy, is a Licensed Life Insurance Analyst with over 20 years of practicing experience and the founder of (LIR) Insurance Solutions. Since 2011, his independent firm has conducted thousands of in-depth policy reviews, serving as a trusted advocate for consumers. The company uses in-depth research and collaboration technologies to solve several of the challenges inherent in the sales agent model, including the fact that few agents understand the technical nuances of complex policies like IULs, Whole Life, or VULs and generally aren't required by law to act in the client's best interests. T he innovations to the market are not technology innovations, but surround raising consumer awareness about existing tools to make better decisions. The first is the website's financial education around 'second opinions'. Life Insurance Review (LIR) believes that 90% of policies could be improved with second opinions that involve independent review committees, technology to evaluate similar policies, transparency and policy design to serve the unique needs of every individual and their financial plan. No doubt, artificial intelligence, when it's able to learn from millions of policies, will be critical to help in these reforms. The second area that LIR is a lead voice for is encouraging consumers to use their 'Free Look Period,' which provides 10 to 30 days to have a new policy reviewed and, if canceled, to receive a full refund. This is the only meaningful consumer protection law in the life insurance sales industry, yet most consumers are unaware of it because their agent, broker, or financial advisor often glosses over it when delivering policies for life insurance, annuities, long-term care, or disability coverage. According to LIMRA, the industry association, nearly 102 million Americans don't have any, or enough life insurance. Of those, households making less than $50,000 annually were more likely to want it but less connected to insurance companies. The gender gap is present here as well, with 46% of women having life insurance vs. 57% of men. Opportunities like this – for insurance companies to sell product, but also for companies like LIR to improve the quality and relevance of life insurance company products (life, annuity, long term care and disability) for all consumers using technology and AI, might be the next big thing that also improves the lives of millions of Americans.
