Coinbase partners with Fannie Mae to make crypto assets truly a "down payment" for home purchases

Original author: Micah Zimmerman

Original compilation: AididiaoJP, Foresight News

Coinbase is collaborating with Better Home & Finance to launch a Bitcoin mortgage backed by Fannie Mae.

This partnership marks a step towards integrating digital assets into the traditional housing finance system. The joint offering of crypto mortgages supported by Fannie Mae by Coinbase and Better Home & Finance opens new avenues for the application of digital assets in housing finance.

This innovative product allows eligible borrowers to use Bitcoin or USDC as collateral for their down payment without having to sell their digital assets. This move not only avoids potential capital gains taxes but also allows borrowers to maintain their market exposure to their assets.

The aforementioned mortgage is designed as a compliant loan product, with standards and protective mechanisms consistent with traditional Fannie Mae-supported loans. Better is responsible for originating and servicing the loans, while Coinbase provides custodial and related infrastructure support for the collateralized Bitcoin and other crypto assets.

The product aims to address a longstanding barrier in the housing market: the need for upfront capital required for down payments.

According to data from Better, approximately 41% of American households are unable to purchase homes due to a lack of sufficient liquid funds, even though these households hold other forms of wealth.

Better CEO Vishal Garg stated, “For decades, the pathway for Americans to achieve homeownership has been limited to selling assets, liquidating investments, or tapping retirement savings. This collaboration will provide a new pathway for millions of Americans holding digital assets.”

According to a press release from the company, the two firms estimate that around 52 million people in the U.S. have held digital assets, accounting for about 20% of the adult population.

This product allows borrowers to use crypto assets as collateral instead of cash, aiming to unlock their asset balance sheets to facilitate home purchases.

Bitcoin-backed Mortgages

Unlike traditional crypto-backed loans, this product is designed to minimize the volatility risk faced by borrowers. The related loans do not require margin calls or additional collateral. Even if Bitcoin prices decline, borrowers are not required to add extra collateral, and simple market fluctuations will not trigger asset liquidation.

Collateral will only face disposal risk if the borrower is at least 60 days overdue on their mortgage payments. This arrangement is consistent with the standard foreclosure processes in traditional housing finance.

Mortgages backed by crypto assets are expected to have interest rates approximately 0.5 to 1.5 percentage points higher than standard 30-year mortgages, with the specific range depending on the borrower’s situation. Coinbase believes that for those looking to avoid liquidating assets, the cost of this interest rate difference may be worthwhile.

Max Branzburg, Coinbase’s head of consumer and business products, stated, “Transforming digital wealth into home purchasing power is a milestone development. Token-backed mortgages are the first step we are taking to open pathways to homeownership for the younger generation.”

The product reflects a shift in wealth holding patterns, especially among younger demographics in the U.S. Coinbase’s data shows that 45% of young investors hold crypto assets, while the figure is only 18% among older demographics. This indicates that digital assets are gradually becoming a primary store of value for the new generation.

Meanwhile, housing affordability continues to deteriorate. Home prices have outpaced income growth, leaving many potential homebuyers caught in a “wealthy in assets, cash poor” situation. Token-backed mortgages attempt to view crypto assets as usable collateral rather than speculative investments to bridge this gap.

Better has previously explored alternative collateral models. In 2023, the company allowed some Amazon employees to use their stock holdings as down payment collateral. Company executives stated that incorporating Bitcoin and crypto assets would significantly expand loan demand. Garg estimated that if the company had launched such products earlier, it could have avoided up to $40 billion in loan origination losses.

The product structure also introduces new features unique to digital assets. Borrowers collateralizing USDC can continue to earn returns on their held assets, which can be used to offset some mortgage costs. Additionally, Coinbase’s custodial model allows users to collateralize only specific portions of their portfolio without locking up all their assets.

The two companies indicated plans to gradually expand the types of eligible collateral, potentially including tokenized stocks, fixed-income products, and real estate assets.

While crypto-backed mortgages have previously existed in limited forms within specific wealth management channels, Fannie Mae’s involvement signifies a move toward broader application for such products. As a government-sponsored enterprise, Fannie Mae sets standards for a significant portion of the U.S. mortgage market.

By combining Bitcoin collateral with a compliant loan structure, the collaboration between Coinbase and Better positions digital assets as part of mainstream financial infrastructure rather than a separate parallel system.

Coinbase describes this product as “as American as apple pie,” and claims it is an evolution of housing financing rather than a departure from traditional models.