Weiss Ratings Report Claims Crypto-Backed Home Loans Spell Trouble
A report published on May 2 by the rating agency Weiss Ratings warns that crypto-backed mortgages “spell risk.” Weiss editor Jon D. Markman said backing a mortgage with crypto is an “interesting strategy,” but stressed that during these market conditions “investors should be skeptical.” Weiss Ratings Editor Doesn’t Believe Crypto and Mortgages Mix
According to the editor at Weiss Ratings, Jon D. Markman, lenders who allow people to use crypto to back a mortgage might be adding more risk to current market conditions. Markman uses the firm Milo as an example, as the Florida-based digital bank is allowing mortgage investors to use digital currencies as collateral. In Markman’s opinion, the trend is similar to the risk-associated home loans that were sold in 2007-2008.
“Pooling risky home loans, then selling them to unsuspecting asset managers, was the recipe for the Great Recession of 2009,” the Weiss editor insists. As long as housing prices continued to climb, homebuyers were able to refinance and everyone got paid, including bondholders.” Markman continued: However, when housing prices imploded, millions of low credit score borrowers defaulted. The rest is history. Markman Believes Higher Interest Rates Will Lower Current Home Prices
The Weiss Ratings report further discusses how interest rates are rising thanks to the Federal Reserve’s recent rate hikes. Typically, Markman says, higher interest rates add a lot more to the monthly mortgage cost and in time the Weiss editor believes it will lower home prices. “That’s why plans at Milo are fraught with warning signs,” Markman adds. Milo is not the only firm looking to allow people to use crypto as collateral for a home loan. Abra just recently partnered with the company Propy to offer crypto-backed home loans as well.
The author notes that financial stocks are down considerably this year despite the fact that interest rates are rising. In recent times, a great number of analysts and economists have said cryptocurrencies are correlated with equities markets this year. While Markman doesn’t believe crypto and mortgages mix, the end of the report notes that crypto asset risk is not 100% negative.
“This isn’t to say all crypto risk is bad,” the Weiss Ratings editor concludes. “Just not in the housing sense. No matter what the markets are doing, the potential to succeed in cryptocurrencies is real.” Tags in this story 2009 depression, Abra, Crypto, crypto as collateral, crypto mortgage, crypto mortgages, Cryptocurrencies, Digital Assets, Equities markets, Florida Digital Bank, home loans, Milo, Mortgages, Propy, Real estate, stocks, weiss, weiss ratings, Weiss Ratings report
What do you think about the recent Weiss Ratings report that claims crypto-backed mortgages are risky? Let us know what you think about this subject in the comments section below. Jamie Redman
Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 5,000 articles for Bitcoin.com News about the disruptive protocols emerging today. Report: 100,000 Cubans Are Using Cryptocurrencies to Bypass Financial Sanctions NEWS | 2 hours ago Banco Galicia Becomes First Bank to Introduce Crypto Trading in Argentina NEWS | 5 hours ago
Image Credits: Shutterstock, Pixabay, Wiki Commons Previous articleBanco Galicia Becomes First Bank to Introduce Crypto Trading in Argentina Next articleReport: 100,000 Cubans Are Using Cryptocurrencies to Bypass Financial Sanctions Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article. Read disclaimerShow comments More Popular NewsIn Case You Missed ItCentral Bank of Brazil Confirms It Will Run a Pilot Test for Its CBDC This Year
The Central Bank of Brazil has confirmed that the institution will run a pilot test regarding the implementation of its proposed central bank digital currency (CBDC), the digital real. Roberto Campos Neto, president of the bank, also stated that this ... read more.UAE Airliner Emirates to Launch NFTs and Experiences in the Metaverse Interest in Real Estate Investments in Spain Grew 400%, With Some Using Crypto and Stocks as Payment Method Iran to Increase Penalties for Unauthorized Cryptocurrency Mining Economist Predicts the Fed"s Response to Inflation Will Push Crypto Higher