If homeowners’ insurance carriers weren’t facing enough issues this year, here’s one more to think about: A Miami company is now offering cryptocurrency-based mortgages.
Some insurance representatives are cautiously optimistic about the idea, but a few are wondering what a Bitcoin mortgage could mean for policies and escrow accounts, particularly if the currency loses value.
“As long as it’s a legitimate mortgage and follows the mortgagor versus mortgagee process, I would not foresee us having an issue with insuring homes with crypto mortgages,” said David Howard, president of Vyrd Insurance, a recently launched property insurance company in Florida.
He added, though, that because this is such a new type of mortgage, further research is required.
Milo, a fintech company with offices in Miami and principals based overseas, announced last week that it is now offering what appears to be the world’s first crypto-based mortgage. Clients will be able to pledge their Bitcoin assets and qualify for low-interest, 30-year loans – with no down-payment, Milo said in a news release.
“The world is changing rapidly, with how consumers make and invest their $2 trillion in crypto wealth,” said Josip Rupena, CEO and founder of Milo.
The company said it is a direct lender that is licensed, audited and insured and is “able to stand behind its commitment.” The news release did not address what might happen if the digital currency were to lose value, as Bitcoin and other cryptocurrencies are known to do.
Company officials could not be reached for comment, but the statement said that conventional mortgages have been tricky for crypto investors, due to tax liabilities and fluctuations in value.
“There are countless stories of people buying property with bitcoin proceeds only to see it increase in value and be worth millions more,” Rupena said in the statement.
One Florida property insurance group initially questioned how it all would work. But after checking with board members, the president of the Personal Insurance Federation of Florida said that most insurers could live with crypto mortgages.
“We probably don’t care how a mortgage is paid — we are only concerned with the insured value of the property, which won’t change because of crypto valuation changes,” Michael Carlson said.
Others agreed. Paul Handerhan, president of the Florida-based Federal Association for Insurance Reform, noted that the source of the home loan may not matter much to insurers.
“If it goes south, it probably wouldn’t affect the insurance policy,” he said, adding that most policies are paid on an annual basis.
Besides, Handerhan noted, the crypto mortgages may open up home ownership to more younger people who are more likely to invest in Bitcoin and other digital currencies, which could mean more policies placed.
It’s not clear how Milo would pay the homeowners’ insurance companies from an escrow account – in Bitcoin or conventional currency. But some insurers are warming to the idea of accepting premium payments through crypto. AXA Switzerland announced last year it would allow non-life policyholders to pay with Bitcoin, and Universal Fire and Casualty said it would accept crypto for some types of business insurance, according to news reports. Metromile, an auto insurer, also said it would accept digital currency for premiums and would pay claims with it.
Cryptocurrency, decentralized money designed to be used over the internet, has been gaining in popularity since Bitcoin appeared on the scene in 2008. Since then, a number of the digital currencies have cropped up, and most have seen significant and frequent fluctuations in value.
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