On an earnings call last month, United Wholesale Mortgage announced its intention to accept cryptocurrency as payment for home loans. With sights set on a Q3 release, homeowners around the country could begin making mortgage payments with crypto this month.
You can already purchase real estate with Bitcoin, but UWM stands to be the first lender to accept crypto payments for existing mortgages in the States. The company plans to start by accepting BTC but may expand the program to include other cryptocurrencies, noting ETH as a possibility.
UWM collects almost a million mortgage payments every month, making it the second-largest mortgage lender in the United States. As a leader in the industry, the company’s decision to accept crypto payments could very well lead to other lenders following suit.
In fact, UWM is following in the footsteps of Matrix Mortgage Global, a Canadian lender that started accepting Bitcoin and other cryptocurrencies for mortgage payments earlier this year. By doing so, MMG hopes to reduce fees, make transactions more transparent, and expand into international markets where credit card payments aren’t feasible.
Both companies pride themselves on leading technological innovation within the industry. So only time will tell whether or not more traditional financial institutions will adopt similar programs.
How Does This Decision Affect Other Loaning Companies and Industries?
If lending companies start accepting Bitcoin or other cryptocurrencies as payment for loans, it could pave the way for various other industries to follow suit. Some examples of industries that could potentially grow their adoption of cryptocurrency payments are credit card companies, investment firms, and wealth management firms. As for the impact on mortgage lenders, accepting cryptocurrency as payment for loans could bring several changes:
One is an increased customer base. By accepting cryptocurrency, mortgage lenders could attract a new segment of customers who hold significant digital assets and prefer using them for major purchases. Another benefit is enhanced transaction speed. Cryptocurrency transactions are typically faster than traditional payment methods, which could potentially expedite the mortgage lending process. Reduced costs and intermediaries make a big difference too. Cryptocurrency transactions involve fewer intermediaries compared to traditional payment methods, which could lead to lower transaction fees and streamlined processes for mortgage lenders.
Cryptocurrencies prices can be quite volatile at times, and mortgage lenders accepting cryptocurrency would need to consider the potential risk associated with fluctuations in the value of the digital assets used for loan repayments. Regulatory considerations come into play as well. Cryptocurrency regulations vary across different jurisdictions. Mortgage lenders would need to navigate the evolving regulatory landscape to ensure compliance with the various regulations.
Types of Crypto Loans
There are two types of loans that crypto users can get using coins for loans: centralized finance and decentralized finance.
- CeFi (centralized finance) loans use centralized exchanges or institutions to get loans, earn interest, and buy or sell crypto.
- DeFi (decentralized finance) loans use peer-to-peer decentralized apps (DApps) to loan or borrow crypto using blockchain technology.
As the crypto market continues to evolve, the impact of UWM’s decision extends beyond the mortgage lending sphere. Other industries, such as credit card companies, investment firms, and wealth management entities may also be influenced to explore cryptocurrency adoption as a means of payment and investment. With centralized and decentralized finance options available for crypto loans, users have a range of choices, further driving adoption of blockchain technology in the finance sector.
The decision to embrace cryptocurrency for mortgage payments represents a pivotal moment in the financial world, with potential implications for various sectors. It showcases how innovative technologies like blockchain and digital assets are reshaping traditional practices and driving the industry towards a more interconnected, efficient and customer-centric future.