Bitcoin mortgage payment legislation proposed in Spain
It may feel like the mortgage industry has been waiting forever for Bitcoin integration.
Price volatility and lack of centralization kept cryptocurrencies from gaining traction in U.S. lending, but that hasn’t stopped momentum abroad. Late July, a Spanish draft bill would allow crypto to be used for insurance and mortgage payments.
Spanish banks and companies that use blockchain technology would be granted major tax and patent cost reductions if the legislation is passed. It also provides for the establishment of a council to provide public advisory services in blockchain technology. This is part of Spain’s wider effort to regulate crypto markets and combat tax fraud.
El Salvador became the first country to accept Bitcoin as legal currency across the Atlantic. The U.S. Federal Reserve also proposed a central bank digital currency, but it was met with bipartisan concern.
Bruce Mizrach, Rutgers University economics professor, said that the same concern prevented private lenders from entering crypto.
He stated that he believes housing finance companies would prefer to receive payment in USD or stablecoins. “If a mortgage company wants crypto exposure, it could also purchase it directly instead of receiving it from clients.
Fannie Mae, Freddie Mac and other lenders don’t allow digital currencies to be used for real estate finance transactions. Jess Kennedy, co-founder and CEO, stated that a borrower who converts cryptocurrency to dollars must’season’ it by sitting in an acceptable account for at least two months before it can be used towards a government-sponsored enterprise mortgage.
She said that Fannie requires documentation to prove that crypto funds were held by the borrower before they are liquidated into U.S. Dollars.
Many in the industry believed that technology-forward markets would use digital coins to secure mortgages by 2021. But widespread adoption would require federal buy in and regulation is the biggest obstacle to this happening.
There have been several attempts to legislate the U.S. crypto market. This was mainly due to the Token Taxonomy Act. It was introduced to the House of Representatives multiple times by Warren Davidson, an Ohio Republican. This act clarifies how digital coins are used for business purposes. It excludes them from securities and creates tax exemptions, reductions for gains and exchanges.
Daniel Payne, an attorney and leader of Murphy & McGonigle’s fintech and blockchain practice groups, stated that he expects crypto to be integrated into housing finance in many different ways. Stablecoins are a solution to the volatility problem. They can create mortgage products that can be paid back in crypto if they are willing to accept stablecoins and have custody of the digital assets.
If passed, the $1 trillion infrastructure bill that is currently in the Senate’s hands could help get regulatory action underway. This legislation would be the first American cryptocurrency legislation. It includes provisions that include a tax and transfers to pay for infrastructure expenditures. It is only a matter time before financial institutions accept cryptocurrency as it grows in popularity and influence.
Mogo, a Canadian lender and finance company, launched a Bitcoin rewards program for its borrowers in March. The amount of the mortgage can determine how much the borrower could be eligible for the digital currency. While these programs have not yet been implemented in the United States, they could prove to be an innovative way for lenders to gain market share as volume decreases and competition increases.
Rick Sharga (executive vice president of RealtyTrac) stated that mortgage products have become almost a commodity. Everyone tends to be competitive on rates and points. This means there is a dire need for lenders to find innovative ways to differentiate their offerings. A Bitcoin incentive will appeal to a small segment of the audience, likely young adults, but it might be a way for lenders to aggressively target this segment.