While the mortgage sector has been slow to embrace crypto in Central America with a murky legal environment and restrictive banking oversight, the second-largest US-based mortgage lender is planning to accept cryptocurrency payments this year. The plan for United Wholesale Mortgage (UWM) is to start with a Bitcoin (BTC) launch between September and November of 2021.
Leading mortgage lenders are treading softly as they step towards what some see as a significant market shift. The leading mortgage lender in the US over the last couple of years has been Quicken Loans, which originated 1.1 million loans worth $314B. UWM was the second-largest mortgage lender in 2020, originating over 560,000 loans worth almost $183B. They are both in a race to incorporate new offerings adjusted to the market reality of high demand and additional crypto-driven growth in the real estate market.
The use of crypto in real estate purchases in the US and Central America has a history of more than 7 years. In Costa Rica, several low-key property sales fully paid in Bitcoin were completed in 2015; however, larger profile crypto real estate purchases in the US date back to 2014 when BitPay facilitated the sale of a Lake Tahoe property that sold for $1.6 million. However, crypto mortgage repayments appear to be a relatively new phenomenon, and crypto mortgage payments are just the first step.
Even a few years ago, using cryptocurrencies to help pay for a down payment or a chunk of a property mortgage would have been unthinkable, but it’s becoming increasingly common in today’s real estate market, and entering more of the real estate scene for property transactions in Latin America. In Costa Rica the crypto mortgage option vía Bitcoin or Ethereum is not quite as clear, but the first half of 2021 saw multiple transactions that included crypto mortgage payments, albeit with a fiat currency transfer. While not all mortgage lenders will accept or even understand cryptos, there are a growing number of brokers taking these new forms of payment seriously.
Transforming the mortgage financing industry with blockchain
Crypto payments have the potential to shift the mortgage industry. However, larger players are keenly aware that Blockchain has the potential to completely transform the entire mortgage financing industry.
Local and global mortgage businesses, including banks with a significant mortgage focus, are facing huge pressure. Internally and externally they are in a fast-paced race to upgrade their operating model as they look to save money, decrease processing times and enhance the customer experience, all of which can be optimized vía blockchain.
Is Spain a forecast of what’s coming to Latin America crypto mortgages?
Spain also has a leg up on the future of crypto mortgage payments.
The People’s Party of Spain introduced a bill proposal that would allow property owners to pay mortgages with crypto and authorize the real estate sector to use their own crypto for mortgage purchases in Spain.
The proposed law also calls Spanish banks to deploy blockchain tech for managing mortgage and insurance by automating related processes using smart contracts, and proposes major tax breaks and patent benefits for companies involved in the crypto and blockchain industry in Spain.
Sure, El Salvador has taken a sink or swim approcah and gone all-in for crypto, facilitating real estate and business transactions across the boards with BTC as legal tender. However, in Costa Rica, Guatemala, and other countries in the region the topic of mortgage payments with bitcoin still seems a way off, or perhaps these countries will simply make the leap rather than walk, and crypto mortgages will be available sooner than we think.