Crypto Mortgage Payment Experiment a Success!

Real Estate News: Real Estate Investing Podcast

It’s a big first for cryptocurrency and real estate. The nation’s second largest lender says it successfully accepted mortgage payments, in crypto, from a handful of borrowers. It was part of a pilot program by United Wholesale Mortgage that was successful, but is now being put back on the shelf, for a later date.

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UWM announced the good news this last week. It says that it “successfully evaluated and accepted the first-ever cryptocurrency mortgage payment in September and five more… in October.” (1) It was the first time that any U.S. lender has accepted cryptocurrency as a home loan payment.

UWM CEO Mat Ishbia said in the announcement: “As we said last quarter, we were going to look into accepting cryptocurrency and test it to see if it’s a faster, easier and cheaper solution and thanks to our innovative technology team members, the transactions were successful.” But he also said that: “Due to the current combination of incremental costs and regulatory uncertainty in the Crypto space, we’ve concluded we aren’t going to extend beyond a pilot at this time.”

Test-and-Learn Process

As it turns out, the program was more of a “test-and-learn” process in preparation for crypto’s future use. UWM says it would resume the use of cryptocurrency and blockchain technology once it becomes something that will “propel the organization forward.”

The program allowed for the use of three kinds of crypto including Bitcoin, Ether, and Dogecoin. Ishbia told CNBC that borrowers “liked” the idea and thought it was “cool” but ultimately, the program only attracted six people. Ishbia says: “There was not enough demand at the end of the day to really push the envelope too hard.” (2)

Investment Tool vs. Currency

As CNBC reports, the experiment provides proof that many people view crypto as an investment tool, and not a currency to buy things. At least not yet. Most cryptocurrency users hold on to their virtual coins, hoping for an astronomical return, as some early investors have seen. CNBC calls it the HODL mindset which stands for “hold on for dear life.”

According to Coinbase, just one Bitcoin is worth more than $60,000. It was first introduced in 2009, but in the last five years, it has gained about 8,600%. Market cap is $1.2 trillion.

Ethereum or Ether has also done well. Current price is about $3,800 per coin with a market cap of more than $480 billion. Over five years, that coin has gained about 27,000% in value.

Dogecoin began as a joke and became wildly popular when Elon Musk promoted it in a tweet. It’s now worth only about $.25 cents per coin, but that also represents more than 100,000% growth. Market cap for Dogecoin is more than $26 billion.

Using Crypto Creates Taxable Event

So there’s money on the table for some investors if they want to “cash in.” One problem with doing that however, is that using crypto will create a taxable event. CNBC says the IRS views crypto as property, and the six homeowners who just paid UWM in crypto will likely face a big tax bill.

A CoinTracker CPA told CNBC: “The one thing that a lot of people don’t realize is that whenever you spend cryptocurrencies to buy a cup of coffee, or any type of consumer item, that triggers a capital gains event.”

As for UWM’s future plans, Ishbia says the lender will be able to turn the program back on when the demand is there. He says: “We know how to do it now.”

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Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.uwm.com/about-us/media-resources/press-releases/2021/october-14-2021

2 -https://www.cnbc.com/2021/10/14/united-wholesale-mortgage-ditches-its-plan-to-accept-bitcoin-ethereum.html