Better Mortgage and Coinbase launch bitcoin-backed mortgages with collateral reuse
Better Mortgage and Coinbase have launched a bitcoin-backed mortgage product allowing home buyers to pledge bitcoin at a 250% collateral ratio to fund their down payment. While price drops do not trigger margin calls, Better Mortgage may rehypothecate the pledged bitcoin, exposing borrowers to counterparty risk. Pledged assets remain locked on Coinbase Prime until the conventional mortgage is fully repaid or refinanced, and applicants must still meet standard Fannie Mae credit and income requirements.
Bitcoin-backed mortgage product structure
▪Better Mortgage and Coinbase launched a bitcoin-backed mortgage product that allows buyers to pledge bitcoin at a 250% collateral ratio to fund a home down payment.
▪The bitcoin-backed mortgage product structures the transaction as two loans: a standard Fannie Mae-conforming mortgage secured by the home, and a second loan funding the down payment secured by the borrower's bitcoin and a second lien on the property.
▪Better Mortgage reported that pre-applications for the Coinbase-powered home loan reached $360 million in requested loan volume following its general public launch.
Bitcoin rehypothecation by lender
▪The rehypothecation arrangement exposes borrowers to Better Mortgage's counterparty risk and ability to return the bitcoin, rather than guaranteeing the borrower's specific coins remain untouched in custody.
▪Better Mortgage may rehypothecate the bitcoin pledged by borrowers, meaning the lender can reuse the collateral in other transactions as long as it keeps an equivalent amount of bitcoin available to return.
Custody terms until mortgage repayment
▪At closing, the borrower's pledged bitcoin moves from their Coinbase account into Better Mortgage's custody account on Coinbase Prime, with Coinbase acting solely as custodian and technology provider.
▪Borrowers cannot recover their pledged bitcoin until the main conventional mortgage is fully repaid or refinanced, potentially keeping the crypto encumbered for 15 to 30 years.
No margin calls on price drops
▪Even if the market value of the pledged bitcoin falls below the down-payment loan amount, the cryptocurrency is only sold if the borrower misses their combined monthly payments.
▪A decline in the price of bitcoin does not trigger margin calls, require additional collateral, or initiate automatic liquidations of the borrower's pledged cryptocurrency.
Liquidation after payment delinquency
▪If a borrower remains delinquent for 180 days, foreclosure on the home may begin under Fannie Mae guidelines, though Better Mortgage must pursue the liquidated bitcoin collateral first.
▪Better Mortgage may liquidate the pledged bitcoin after 60 days of combined monthly payment delinquency, but will sell only enough to repay the debt and bring the account current.
Borrower qualification requirements
▪The bitcoin-backed loan is designed solely to solve the cash-for-down-payment hurdle and does not convert cryptocurrency holdings into qualifying income or waive credit thresholds.
▪Pledged bitcoin does not help a borrower qualify for the primary mortgage, and applicants must independently satisfy Fannie Mae's standard income, credit score, and debt-to-income requirements.
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