Bitcoin plummets 20% as the first Fannie Mae token-backed mortgage is funded. Weinberg believes that volatility makes the risk too high
When Better and Coinbase announced Thursday that they had funded the first Fannie Mae-backed mortgage in the US using Bitcoin as collateral, many in the industry touted the accomplishment. The couple who bought the home pledged their crypto holdings rather than liquidating them to cover a down payment.
However, just one day later, the headlines brought to light one of the concerns about digital currency as collateral.
On Friday, Bitcoin fell below $60,000 for the first time since October 2024, down nearly 20% for the week and more than 52% from its peak above $126,000 last October. Experts said the same jobs report that complicated the Fed's rate path sent yields higher and pressured risk assets across the board, crypto included.
FHFA announced last summer that support for crypto in mortgages was on the way. This particular product doesn’t have the digital currency backing the whole loan, but the down payment for the mortgage. With younger borrowers more heavily involved in crypto, the thought is that it would allow those borrowers to find new ways to help them get into their first home. However, one industry veteran said the volatility risk involved gives him pause.
Glen Weinberg (pictured top), COO and partner of Fairview Commercial Lending, said his firm has been asked to do crypto mortgages before. He has turned them all down.
"We've been asked to do a bunch of crypto mortgages, but I won't touch it," Weinberg told Mortgage Professional America. "It's just so volatile. You can have huge changes from day to day. I'm not in the hedging risk. I tell our borrowers, I don't care how you get us the money, as long as it's green. Don't care how you get it. But no alternative assets. It's just got to be cash or dollar-denominated. There's just too much volatility."
The volatility problem
Weinberg's objection goes deeper than this week's price action. Overall, stock markets seem to be soaring, and many believe that at some point, a market correction in even more traditional markets seems like a good bet. Weinberg wonders what happens to something like Bitcoin if traditional markets crash.
"The risk and reward are absolutely insane," he said. "We're at the top of the market. You can look at pretty much any asset class, and they're all kind of together. There's a really high correlation if you look at the S&P 500, even house prices in most markets, and Bitcoin. So when there is a downfall, everything's going to kind of go down together, including Bitcoin."
That correlation is precisely the problem. A borrower pledging Bitcoin as collateral on a mortgage may find both their collateral and their home value falling at the same time.
"I'm in the mortgage business," Weinberg said. "I understand real estate. Why would I, as a lender, introduce just another layer of risk? It'd be like accepting a foreign currency. I don't have that skill set to hedge against it. The volatility is kind of crazy. Someone might make a lot of money off of it, but from a risk perspective, I think it's dumb."
Better CEO Vishal Garg acknowledged that the product targets a specific gap: buyers who qualify on every traditional measure but lack the cash for a down payment because their wealth is held in digital assets.
"The 30-year fixed mortgage was designed for a generation that kept its savings in a bank account and built equity through a single employer," Garg said. "That's not the financial reality of millions of qualified buyers today that are building real wealth in digital assets."
Politics and the GSEs
Weinberg said the decision by Fannie Mae surprises him less than it might have a few years ago.
"Theoretically, it should be surprising, but to be honest, it's not," he said. "As soon as the government took them over, you're seeing all sorts of pet projects come out of Fannie and Freddie. They aren't really focused just on risk. There's politics now involved."
When the GSEs had shareholders to answer to, risk drove decisions. That is no longer the only factor in play, Weinberg said.
"President Trump, he's all in on crypto," he said. "So that's coming down from FHFA. 'Hey, we want you to have crypto mortgages, because that's the trend and score some political points.' So I should be surprised, but I'm not based on the politics."
The first loan closed on Thursday. By Friday, Bitcoin was down nearly 20% for the week, the kind of swing that no lender would accept from oil futures, foreign currency, or any other volatile commodity used as collateral.
"Why would I, as a lender, want to accept oil futures?" he said. "It's the same thing. When this whole thing unwinds, anybody who's got those crypto mortgages, it's going to go south really, really quick."
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