A major mortgage lender has announced it will allow crypto to be used for mortgage approvals, without the need for liquidation.
This has been a sticking point for those with sizable crypto holdings who still want to take advantage of a traditional mortgage.
While they could sell their holdings and then use those funds for down payment, reserves, and closing costs, many don’t want to.
Instead, there’s the mantra of HODLing, that is, holding on for dear life and never, ever selling.
To address this, Newrez is rolling out a new solution that recognizes the assets without the need to liquidate.
Newrez Says Keep Your Crypto and Still Get a Mortgage
Newrez, which refers to itself as a top-five mortgage lender and loan servicer, plans to roll out the new crypto mortgage offering in February.
Specifically, it allows the use of crypto assets for things like asset verification and income estimation without the need to sell.
At launch, Newrez will recognize the following types of crypto: Bitcoin (BTC), Ethereum (ETH), SEC-approved spot ETFs backed by BTC or ETH, and USD-backed stablecoins.
And they need to be held with either U.S. regulated crypto exchanges, retail fintech apps, SEC/FINRA-regulated brokerages, or nationally chartered banks under OCC oversight.
So it’s all going to need to be well documented and verified, even if it’s not a traditional investment.
The company says it’s the first of the top-25 mortgage lenders in the country to allow this (there are some smaller crypto-specific offerings out there like Figure and Moon).
How Does It Work and Why Is It Being Offered?
So how would this actually work? Well, for example, if you own a bunch of Bitcoin or some other recognized cryptocurrency, you can keep it fully invested while still qualifying for a traditional mortgage.
A lot of young people who have eschewed conventional investments like stocks and bonds while opting for crypto still want to own homes.
Newrez Chief Commercial Officer Leslie Gillin noted in the news release that an estimated 45% of Gen Z and Millennial investors own crypto, so it’s a common issue.
However, many of them want to have their cake and eat it too because heaven forbid they miss out on the next monster rally.
And they aren’t necessarily wrong because the same basic tenet applies to the stock market as well. Stay invested.
But while borrowers can utilize these more traditional investments like stocks and bonds toward a mortgage approval, they have to sell crypto assets first if they want to use them.
Per Fannie Mae, “Virtual currency that has been exchanged into U.S. dollars is acceptable for the down payment, closing costs, and financial reserves.”
It can’t be kept in its invested state to be used, though there are talks about changing that.
Conversely, stocks, bonds, and mutual funds can be used for reserves and liquidation is not required.
In the meantime, Newrez is rolling out this non-agency solution outside the guidelines of Fannie Mae and Freddie Mac.
As stated, they will recognize these “eligible crypto holdings” for both income and asset verification, allowing prospective home buyers to move forward with a home purchase and not miss out on any potential upside.
However, an “adjusted valuation” will apply to any crypto assets utilized to account for what they refer to as “market volatility.”
In other words, crypto is still relatively new and being treated more conservatively to account for bigger potential valuation swings.
Mortgage Borrowers Must Still Use U.S. Dollars
Importantly though, the borrower must still pay both their down payment and any closing costs in U.S. dollars.
So that money still has to come from a traditional, liquid source if they don’t want to sell their crypto.
They say their solution gives customers the flexibility to decide which funds they use to cover those costs at closing.
Arguably, this could help additional prospective buyers make the leap to homeownership.
But importantly, you’ll still need to make your monthly mortgage payment in U.S. dollars!
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 19 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on X for hot takes.