Better and Coinbase offer bitcoin-backed mortgages with reusable collateral

Better and Coinbase made their bitcoin-backed home loan generally available last week. Better said pre-applications reached $360 million in requested loan volume after the public launch. Borrowers on the earlier waitlist had projected $260 million in loan volume. Better Mortgage may rehypothecate bitcoin pledged through the Coinbase-powered loan. Customers cannot recover the bitcoin until they repay or refinance the conventional mortgage. Bitcoin price drops do not trigger margin calls or automatic liquidations. The bitcoin is sold only if a borrower misses combined monthly payments. Borrowers receive two loans at closing. The first is a standard Fannie Mae-conforming mortgage secured by the home. The second loan funds the cash down payment. The second loan is secured by the borrower's bitcoin and a second lien on the same property. The bitcoin-backed loan starts with a 250% collateral ratio. Borrowers must pledge $2.50 of bitcoin for each $1 borrowed for the down payment. Better's example involves a $500,000 home. The buyer pledges $250,000 of bitcoin for a $100,000 down payment. Better originates both loans. Borrowers make one combined monthly payment. At closing, the bitcoin moves from the borrower's Coinbase account to Better's custody account on Coinbase Prime.