Weiss Ratings, a Florida-based ratings and research business, has issued a warning about the hazards of crypto mortgages in the present US economic situation.
Milo, a Miami-based digital banking firm that offers 30-year mortgages backed by Bitcoin (BTC), Ethereum (ETH), or stablecoins as collateral, received special attention from the company. There are no down payments required, and the company’s lending rates range from 3.95 percent to 5.95 percent.
Weiss analyst Jon D. Markman warned against such mortgages in a May 3 research, citing the dismal performance of equities and cryptocurrency this year, a housing bubble in the United States, rising interest rates, and the Federal Reserve’s forthcoming policy adjustments as reasons.
“The product seems to be like a win-win, assuming real estate and crypto prices keep rising”
” … except there are signs both bets are unlikely to be winners in the near term.”
“Bitcoin is off by 40% since it reached $66,000 in November 2021.”
“And U.S. property prices now face headwinds from a change”
” in Fed policy and rising mortgage rates,”
So, Weiss analyst adds.
Weiss analyst Markman did say that not all crypto risk is negative, but that it might be in the real estate industry. That’s, before adding that…
“no matter what the markets do, the opportunity to prosper in cryptocurrency is real.”
Many cryptocurrency and stock investors have been fearful about the market ramifications of significant interest rate hikes this year as the Federal Reserve attempts to rein in inflation.
With both markets underperforming owing to a variety of issues, macro analysts such as Alex Krueger have boldly predicted that the Fed’s latest comments this week “will determine the market’s fate” moving ahead.
Taking the property market out of the equation, there appears to be some wiggle room for Milo users if the price of BTC or ETH drops dramatically in the coming months.
The price of the collateralized crypto assets “may decrease in value with no effect as long as it does not dip to 35 percent of the total loan amount,” according to the mortgage terms and conditions. Users must top up their collateral within 48 hours after attaining the required percentage to prevent liquidation. Stablecoins, on the other hand, might be used in times of market turbulence.
Milo raised $17 million in Series A funding in March and expects to expand its mortgage offerings to meet increased demand, as well as increase its workforce.
Weiss analyst Markman, on the other hand, expressed worry that Milo’s “bigger objective is to pool crypto-backed house loans and offer them as bonds to asset managers and insurance companies,” comparing this to the activity that led to the housing market meltdown in 2009.
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