It seems that US home buyers are not interested in paying their mortgages with cryptocurrencies like Bitcoin.
United Wholesale Mortgage, which debuted in January with a Special Purpose Acquisition (SPAC) merger, began experimenting with crypto payments in August for the first time in the industry. But CEO Matt Ishbea told CNBC that after his testing, the company decided it wasn’t worth it.
“Given the current combination of rising costs and regulatory uncertainty in the crypto space, we have concluded that we will not go beyond the beta range at this time,” Ishbia said.
The Michigan-based mortgage company experimented with three different types of cryptocurrencies — bitcoin, ether, and Dogecoin — and several different borrowers to see how the process would work. UWM successfully accepted its first crypto mortgage payments in September and five more in October.
But in the end, the demand was not there. Ishbia told CNBC that borrowers “loved it” and “said it was great,” but that having the option to deal in cryptocurrency “wasn’t a driver.”
“There wasn’t enough demand at the end of the day to push the envelope too hard,” he said.
It is the latest evidence that many users of cryptocurrency are treating it as an investment rather than a substitute for money. Although cryptocurrencies have risen in price in the past year, they are rarely used to buy and sell physical goods. Instead, most investors stick to a “HODL” (hold on to dear life) mentality, where they buy and hold virtual currencies in the hope that their value will rise. Last year, it was a good bet – bitcoin is worth more than five times what it was a year ago, while the price of ether has gone up more than ten times.
Treasury Secretary Janet Yellen and Securities and Exchange Commission Chairman Gary Gensler said they do not plan to impose restrictions on cryptocurrency trading. However, the proposed infrastructure bill contains new reporting requirements for crypto “brokers,” and major players in the space, including Coinbase and Andreessen Horowitz, have demanded more clarity from regulators.
UWM — the second largest mortgage lender in the country after Quicken, the Detroit lending giant owned by the Rocket Companies — operates solely through wholesale channels, meaning the company employs a fleet of intermediaries who then connect customers with home loans.
The company itself does not keep cryptocurrencies on its balance sheet. UWM converts the received tokens into fiat currency at the point of the transaction.
For the six homeowners who took part in the trial, some may now face a tax bill for payments they made in cryptocurrency.
Since the IRS classifies digital currencies such as Bitcoin as property, making a cryptocurrency mortgage payment is a taxable event.
There is always a difference between the amount you paid for the cryptocurrency, which is the cost basis, and the market value at the time you spend it. This difference can result in capital gains taxes on income, as well as other taxes you have to pay, such as sales tax.
Sheehan Chandrasekera, a certified public accountant and corporate head of tax strategy at CoinTracker.io, a digital currency tax software company that helps customers track their cryptocurrency via virtual wallet addresses and manage their corresponding tax obligations.
The UWM can pull the project off the shelf in the future if enough borrowers eventually take the interest.
Ishbia told CNBC that it’s crypto work “It’s getting more common, we can turn it on any day. We know how to do it now.”