Not Quiet The "Fog A Mirror, Buy A House," But Crypto-Based Mortgages Are Crazy

ndtv.com:

How much would you like your pension fund to bet on crypto-based mortgages?

(Bloomberg Opinion) -- If you entered a contest to see who could design a financial instrument to lose the most money the fastest, you would struggle to come up with a better idea than taking home mortgages backed by crypto, slicing them into mortgage-backed securities and selling them at the moment the global financial system is being bludgeoned by pandemic, war and Jerome Powell.

And yet here we are: Bloomberg News reports the hot new thing in finance is the nouveau crypto riche putting up their expensive digital assets as collateral to buy expensive houses using a more-or-less traditional mortgage, but with no dead-tree dollars down.

The brainchild of a company called Milo Credit — based in America's Crypto Capital, Miami — this offering goes a little further than what we've seen so far, which has included the use of crypto for home down-payments and apartment deposits and the occasional crib selling as an NFT.   

Naturally the world's MBS sausage-makers want in. “We see a lot of interest in this area and expect it will develop into a new asset class,” a Sidley Austin lawyer tells Bloomberg.

For sure! But each one of these things should be sold with a pair of asbestos gloves to handle them, given the layers of red-hot risk being piled on at every step.

First you've got the collateralization with crypto, a famously stable asset that rose 305% in 2020 and has plunged 40% lately. Using mortgage helps crypto owners avoid cashing out and paying taxes to raise dollars.

But the loan terms subject them to possible capital calls or even property seizure if the “crypto-to-loan amount” — a series of words if ever there was one — crosses certain thresholds.

Those