As the Trump administration promotes cryptocurrency, smaller lenders are experimenting with crypto assets to qualify borrowers overlooked by traditional underwriting. Companies like UMortgage and Milo have closed millions in such loans, highlighting both opportunities and risks in this emerging market. This approach allows homeowners to leverage digital wealth without selling it, though volatility and regulation remain hurdles.
The integration of cryptocurrency into mortgage lending has gained traction since Donald Trump's second term began, with lenders exploring ways to include digital assets in underwriting. In June, Federal Housing Finance Agency director Bill Pulte encouraged Fannie Mae and Freddie Mac to formally consider crypto for single-family mortgage applications, prompting some smaller players to act.
UMortgage, operating in 48 states and Washington D.C., closed its first crypto-backed mortgage in September—a $4 million non-qualified mortgage (non-QM) loan based on asset depletion rather than traditional income. The borrower, who had rented for 15 years due to non-traditional earnings, expressed relief. "He was just so thankful," said Tyler Hodgson, UMortgage's executive vice president of growth. "He's like, 'Man, it's been a long time coming. [I've] been renting for 15 years and wanted to get into homeownership, but I've tried a couple times in the past and just couldn't do it because my income was not traditional.'"
A July Gallup poll indicates 14% of U.S. adults own bitcoin or other cryptocurrencies, yet most lenders ignore these assets. Miami-based fintech Milo pioneered crypto mortgages in April 2022, completing nearly $90 million in transactions, mostly in the past year. CEO Josip Rupena noted that many buyers seek homeownership without liquidating crypto to avoid missing potential gains.
These loans offer transparency: lenders can monitor borrowers' crypto wallets post-closing, unlike traditional accounts. Hodgson explained, "Once that [traditional] loan closes, you don't know that borrower's financial picture until they all of a sudden miss a payment... [Crypto wallets are] maybe not the perfect picture, but it could give [lenders] insights into the borrower's financial health going in the future."
Milo's dual-collateral structure—property plus crypto—allows higher loan-to-value ratios. If payments falter, lenders can sell crypto holdings. Rupena added, "We have Bitcoin that comes in that's very liquid, that allows us to potentially control some of the severity."
Challenges persist due to crypto's volatility, with Bitcoin suffering four 50%+ retraces from 2013-2022, including a 50% drop on March 12, 2020, during the Covid crash. Regulatory uncertainty, exemplified by China's 2021 ban, exacerbates price swings and risks like fraud and cyberattacks. Lenders mitigate this with haircuts: UMortgage applies 50%, while Figure limits crypto to 10-15% of income qualification, per chief capital officer Todd Stevens.
Rupena opposes haircuts, favoring a 35% baseline collateral requirement. Major banks remain cautious, though JPMorgan plans to launch a program by year-end allowing Bitcoin and Ethereum as collateral for secured loans via a third-party custodian.
Experts like Chris Whalen of Whalen Global Advisors question broader adoption, citing costly manual underwriting. "That ultimately is the question, how much risk does the lender want to take?" Whalen said. UMortgage faces investor shortages, securing only LendSure for recent deals, but Milo reports growing interest amid potential laws like the GENIUS Act.
