White House Warns on Crypto-Backed Mortgages Amid Partnership with Coinbase

The White House has issued a warning about the potential risks associated with crypto-backed mortgages, a new financial product that allows homebuyers to use their cryptocurrency holdings as collateral for loans. The partnership between Better Home and Finance and Coinbase is the first of its kind to be accepted by Fannie Mae.

The new offering aims to help Americans buy homes without having to liquidate their cryptocurrency holdings, thereby avoiding capital gains taxes and maintaining exposure to potential future appreciation of assets like Bitcoin. However, economist Peter Schiff has criticized the product, arguing that it increases the cost and risk of default for borrowers.

Borrowers take out two simultaneous loans: a traditional primary mortgage and a secondary loan backed by their cryptocurrency holdings. The cryptocurrency remains locked in a Coinbase Prime account until the loan is repaid, and borrowers do not face margin calls if the value of their crypto drops as long as they continue making monthly payments.