Weiss Ratings issues warning against BTC-backed mortgages
A new generation of companies has sprung up lately, offering mortgages backed by BTC and Ethereum, with customers not having to pay a deposit. As these companies say business is booming, one of the world’s top ratings agencies, Weiss Ratings, has issued a warning against these mortgages, saying they look a lot like the run-up to a similar financial crisis. to that of 2008.
Weiss focused his attention on Milo, a Florida company that is at the forefront of BTC-backed mortgages. According to a recent Bloomberg report, the company has a waiting list of 8,000 people who want to buy real estate in New York, California and Texas. In the past month, he claims to have issued pre-approval letters for $340 million in mortgages.
“We were going to refine that and expand it,” said Josip Rupena, the company’s founder. “Milo will seek to provide other long-term solutions for those with crypto wealth – not just mortgages.”
Milo’s products include 30-year fixed-rate mortgages secured by digital currency holdings, including BTC and ETH, and loans of up to $10 million on homes. Customers can make their monthly payments in digital assets or cash, with rates being around 3.95% to 5.95%.
Since they’re not liquidating their digital assets, customers avoid capital gains taxes and continue to speculate on future price increases, making it seem like everyone’s a winner, except this one isn’t. is not according to Weiss.
The agency notes: “The product appears to be like a win-win, assuming real estate and crypto prices continue to rise…except there are signs that both bets are unlikely to hold. short-term winners.”
Weiss also issued a warning about another aspect of Milo’s business model. The startup, which recently raised $17 million to further its mission, plans to bundle BTC-backed home loans and offer them as bonds to asset managers and insurance companies, and even in the form of bonds in a securitization, revealed the founder.
But it could end up being disastrous, Weiss believes, drawing a parallel with the 2008 financial crisis.
“This should all sound familiar. Bundling risky home loans and then selling them to unsuspecting asset managers was the recipe for the Great Recession of 2009.”
Weiss Ratings is not the only entity to sound the alarm over Milo BTC-backed mortgages.
John Kerschner, Head of US Securitized Products for Janus Henderson Investors, said: “A crypto mortgage seems inefficient given the volatility. People think [BTC] will go to the moon but nobody thought the big financial crisis or Covid was coming. These things happen.
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