Cryptocurrency has become a popular investment for many people, with the values of some coins tripling in 2017. But what about if you want to buy your dream home? There are risks involved and Weiss Ratings is warning that mortgage lenders should be careful when considering crypto-backed mortgages in their applications.
The “Weiss Ratings issues warning over crypto mortgage risks” is an article that discusses the risk of using cryptocurrency to secure a home loan. The article states that there are other ways to reduce the risk of purchasing a home with cryptocurrency. Read more in detail here: is weiss crypto worth it.
Weiss Ratings, a Florida-based ratings and research business, has issued a warning about the hazards of crypto mortgages in the present US economic situation.
Milo, a Miami-based digital banking firm that provides 30-year mortgages backed by Bitcoin (BTC), Ethereum (ETH), or stablecoins as collateral, received special attention from the business. There are no down payments required, and the company’s lending rates range from 3.95 percent to 5.95 percent.
Weiss analyst Jon D. Markman warned against such mortgages in a May 3 research, citing the dismal performance of equities and cryptocurrency this year, a housing bubble in the United States, increasing interest rates, and the Federal Reserve’s forthcoming policy adjustments as reasons.
“The product seems to be a win-win if real estate and cryptocurrency values continue to rise… but there are hints that both bets are unlikely to succeed in the short future.” Bitcoin has lost 40% of its value since peaking at $66,000 in November 2021.”
“And, as a result of a shift in Fed policy and increasing mortgage rates, U.S. home values are now facing headwinds,” he said.
Markman did say that not all crypto risk is negative, but that it might be in the real estate industry, before adding that “no matter what the markets do, the opportunity to prosper in cryptocurrency is genuine.”
Many cryptocurrency and stock investors have been fearful about the market ramifications of significant interest rate rises this year as the Federal Reserve attempts to rein in inflation.
With both markets underperforming owing to a variety of issues, macro experts such as Alex Krueger have boldly predicted that the Fed’s recent comments this week “will decide the market’s destiny” going ahead.
Taking the property market out of the equation, there seems to be some wiggle space for Milo users if the price of BTC or ETH drops dramatically in the coming months.
The price of the collateralized crypto assets “may decrease in value with no effect as long as it does not sink to 35 percent of the entire loan amount,” according to the mortgage terms and conditions. Users must top up their collateral within 48 hours after attaining the required percentage to prevent liquidation. Stablecoins, on the other hand, might be used in times of market turbulence.
Bitcoin’s ‘bad market,’ according to a trader with stocks due to surrender, may push the price to $25,000.
Milo secured $17 million in Series A investment in March and expects to expand its mortgage offerings to meet increased demand, as well as increase its workforce.
Markman, on the other hand, expressed worry that Milo’s “bigger objective is to pool crypto-backed house loans and sell them as bonds to asset managers and insurance firms,” comparing this to the activity that led to the housing market meltdown in 2009.
“It’s a fascinating approach… However, given present market circumstances, investors should be cautious, particularly when it comes to financial companies. All of this should be recognizable to you. The Great Recession of 2009 was caused by the pooling of bad house loans and then selling them to naive asset managers.”
Weiss Ratings is warning that the risks of buying a crypto mortgage are high. The ratings agency has been making this claim for years, but now it’s time to take action before it’s too late. Reference: weiss crypto predictions.
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