Cathie Wood praised adding crypto in mortgage qualification

Cathie Wood, the CEO of ARK Invest, has lauded a new proposal by the US Federal Housing Finance Agency (FHFA) that could change the mortgage market.

The FHFA is considering a proposal to factor in cryptocurrency, particularly Bitcoin when qualifying for a mortgage. Wood described the move as “a major step” toward integrating digital assets with traditional financial systems.

She says the proposal could bring financial access to millions of crypto investors who are barred from homeownership because their wealth isn’t stored in traditional assets.

FHFA explores crypto for mortgage approval

The FHFA has said that it’s actively working to figure out how digital assets can have a valid place in mortgage underwriting. Bill Pulte, a housing advocate involved in the ongoing talks, said, “We will study the usage of cryptocurrency holdings as it relates to qualifying for mortgages.” 

It would be a break from traditional mortgage underwriting, which large banks use to vet potential homeowners based primarily on their income stability, proven employment record and credit score.

Today, crypto holders looking to purchase homes frequently need to convert their cryptocurrency holdings to cash, generating taxable events and giving up long-term investment positions. The FHFA’s proposal would enable them to hold on to their Bitcoin while employing it to secure home loans.

Top crypto figures push for Bitcoin-backed mortgages

Cathie Wood isn’t the only big-name proponent of the proposal. Bitcoin bull and Strategy Chairman Michael Saylor has contended for some time that Bitcoin should be seen as a serious financial asset rather than a plaything and has not been shy of proclaiming its virtues to anyone who will listen.

Getting a traditional loan can be difficult for many crypto investors, particularly pioneer adopters, freelancers and online entrepreneurs because their income is not funneled through traditional paths. They get turned down despite having substantial crypto wealth.

The proposed rule change would partially redefine who can be considered “creditworthy.” Instead of penalizing nontraditional earners, it would establish a framework that mirrors modern wealth building.

Authorities add that this direction would incentivize lenders to create and offer mortgage products designed specifically for digital currency owners.

It may also create crypto-collateralized mortgages, in which borrowers put up part of their crypto stocks as assets against the loan, all without having to cash out their assets.

Digital assets gain ground in the mortgage market

If the FHFA’s proposal is adopted, it could have effects far beyond the mortgage market. If the home loan sector formally embraces cryptocurrency, it would be a formal step towards embracing digital assets as part of the broader financial system.

For crypto holders, that could be a brave new world of financial inclusion. Borrowers could use their Bitcoin as investment capital to secure real-world, tangible assets, such as homes, with loans. This would unlock liquidity without taxes on capital gains and without being required to sell your source of income.

The move may prompt wider adoption of Bitcoin and other cryptocurrencies among retail and institutional investors. For one, it would give the space the coveted sense of legitimacy if major institutions supported by the government accepted crypto as part of financial qualification processes.

Banks could even be persuaded to build infrastructures to deal with crypto-backed loans. People may have some hybrid lending tools in the future, such as fiat- and crypto-based mortgage offerings.

If Bitcoin-denominated mortgages become the norm, new types of mortgage-backed securities, including exposure to digital assets, could be introduced.

The FHFA is still collecting public input and studying the potential effects, but the response from crypto and financial leaders indicates powerful winds behind the concept.

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