Weiss Ratings Warns of Risks Associated With Crypto Mortgage
2022.05.03 18:41
Weiss Ratings Warns of Risks Associated With Crypto Mortgage
- Weiss Ratings has issued a warning regarding the risks of crypto mortgages.
- One of the companies that the firm placed a spotlight on is a digital baking startup based in Miami, called Milo.
- Another concern raised by the firm includes Milo’s larger plan to pool crypto-backed home loans and offer them as bonds to asset managers and insurance companies.
Weiss Ratings, a Florida-based ratings and research firm, has issued a warning regarding the risks of crypto mortgages. This announcement comes in the midst of the current economic climate in the United States.
One of the companies that the firm placed a spotlight on is Milo – a digital banking startup based in Miami that offers 30-year mortgages backed by cryptos such as Bitcoin (BTC) and Ethereum (ETH). Stablecoins can also be used as collateral. Milo offers loan rates that vary between 3.93% and 5.95% with zero down payments.
An analyst from Weiss, Jon Markman, released a report on May 3 wherein he urged caution with crypto-backed mortgages. He also cited the poor performance of stocks and crypto this year, as well as a US housing bubble, rising interest rates, and the Federal Reserve’s upcoming policy changes in the report.
The report stated “The product seems to be like a win-win, assuming real estate and crypto prices keep rising … except there are signs both bets are unlikely to be winners in the near term. Bitcoin is off by 40% since it reached $66,000 in November 2021.”
Another concern that was raised by the analyst is Milo’s “larger plan to pool crypto-backed home loans and offer them as bonds to asset managers and insurance companies,” and likened it to behavior similar to that which resulted in the 2009 housing market crash.
Markman did conclude, however, that not all crypto risk is bad, but that this will likely be the case in the property sector. This is before he added that “no matter what the markets are doing, the potential to succeed in cryptocurrencies is real.”
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