Better disclosed, however, that it may reuse the pledged bitcoin as long as it keeps an equivalent amount available to return.
Coinbase acts only as the custodian and technology provider and has no role in extending credit or deciding when collateral is liquidated, the companies told CoinDesk.
Bitcoin does not help a borrower qualify for the first mortgage. Applicants must still satisfy Fannie Mae’s ordinary income, credit score and debt-to-income requirements independently of their crypto holdings.
“Nothing in the product converts crypto holdings into qualifying income or waives DTI or credit thresholds,” Better said in written responses. “The Bitcoin loan only solves the cash-for-down-payment problem.”
Pledged bitcoin may be reused
“Better may rehypothecate the pledged bitcoin, provided it keeps equivalent Bitcoin on hand to return the collateral at loan payoff,” the company said.
Rehypothecation allows pledged collateral to be used in another transaction rather than remaining untouched in custody.
In practical terms, the borrower is promised an equivalent quantity of bitcoin when the loan ends, rather than being assured that the same coins will remain untouched throughout it. The arrangement therefore exposes the borrower to Better’s ability to maintain and return that bitcoin, in addition to movements in the value of the crypto and the property.