The second-largest national mortgage lender will allow borrowers to pay their mortgages in Bitcoin before the end of this year. United Wholesale Mortgage announced that it will be the first U.S. mortgage company to accept cryptocurrency for monthly payments.
UWM will accept Bitcoin as a payment because it has nearly 1,000,000 consumers that pay us monthly mortgage payments. We’re always trying for a way to make things simpler for our clients,’ Mat Ishbia said, the chairman and CEO of the company.
This raises questions about cryptocurrency and whether it can be used as an exchange currency. Experts in financial services don’t anticipate a rush to pay their mortgage this way.
Clark Kendall, a financial adviser who runs Kendall Capital Management in Rockville Maryland, stated that while it is great to know that cryptocurrency can be used to pay off a mortgage, there are operational issues for individual investors.
What will the payment process look like?
United Wholesale Mortgage is the nation’s number one mortgage lender. The nation’s No. 2 mortgage lender. According to Bankrate analysis of federal Home Mortgage Disclosure Act data, it originated over 560,000 loans in 2020. This was a record that trails only Rocket Mortgage.
Ishbia stated that United Wholesale Mortgage will accept Bitcoin, the most popular cryptocurrency. Its market value is close to $1 trillion.
Ishbia stated that his company is open to accepting other virtual currencies. Although he didn’t give his name, Litecoin, Cardano and XRP are the most popular cryptocurrencies.
United Wholesale Mortgage did not provide any details on how payments might work. Customers will be able to pay with Coinbase and other cryptocurrency brokerages. It is unclear. These issues are still being resolved by the company with federal authorities. Ishbia stated that the best thing about working in such a tightly regulated industry was being able to communicate directly with regulators and ensure everyone is doing right before any changes like accepting cryptocurrency.
Volatility can be a problem
Bitcoin has been the subject of intense interest over the past year and its price has risen accordingly. A single bitcoin was worth slightly more than $10,000 in September 2020. The price of bitcoin was hovering around $65,000 by April.
Bitcoin fell below $30,000. This happened within months. Bitcoin is now at $50,000 and on the rise. This rollercoaster ride is an opposite to the stability that is hallmarked major currencies like the dollar and euro.
Bitcoin’s volatility presents many challenges. One is that there is a mismatch between a currency stable and an exchange medium whose price fluctuates greatly.
“If your monthly mortgage payment is $1,000, should you send $1,200 or $800 worth of Bitcoin to cover this month’s payment?” Kendall agreed.
Greg McBride is Bankrate’s chief financial analysts. He stated that he wouldn’t recommend basing next month’s payment of mortgage on the value of a stock you own now and he wouldn’t recommend it based on a speculative investment.
Bitcoin’s price can fluctuate so quickly that borrowers might be worried about an increase in value between the time a payment is made and when the account is credited.
The idea of using cryptocurrency to pay bills is not a good idea for true believers in Bitcoin. Bitcoin’s value will soar past $100,000 that you would think it is worthless, so why would you want to use it for your mortgage payment when boring old dollars can do the same thing?
Tax problems could be complicated
Another stumbling block is taxes. Although tax policies regarding cryptocurrency are still in development, the IRS considers cryptocurrency used to purchase something or pay for expenses to be a potentially taxable event.
According to the American Institute of Certified Public Accountants, trading bitcoins in exchange for a mortgage payment could result in the capital gains tax.
Kendall stated that he could not see how cryptocurrencies could be used to pay off debt. He said that the investor would need to sell their cryptocurrency to get their mortgage paid off in full.
“Using cryptocurrency to pay monthly mortgage payments doesn’t make any operational sense to me.”