Author: Boaz Sobrado
Compiled by: Chopper , Foresight News
Twelve years ago, Vishal Garg personally experienced the difficulties of buying a home and has been searching for a solution ever since. "At the time, I realized I had to sell assets, pay capital gains taxes, and convert them into cash to cover the house payment. Why can't I directly pledge assets instead of having to liquidate them for cash?" the Better Home & Finance CEO said in an interview.
Even trickier was the sequence of the transaction process. "What if your offer isn't accepted after you make it? But real estate agents require you to have cash ready, or else sellers won't take your offer seriously. Buyers are forced to sell assets, pay taxes, and only then find out if their offer is accepted."
In March of this year, Better partnered with Coinbase to launch a solution. Borrowers pledge Bitcoin or USDC to obtain two loans: one is a Fannie Mae-compliant first-lien mortgage; the other is a separate private financing loan for the down payment, secured by crypto assets and accompanied by a second lien on the house. The Wall Street Journal reported the same day that Fannie Mae was accepting mortgages backed by crypto assets for the first time. In early June, a couple in their early thirties from Ann Arbor, Michigan, completed the first loan under this model. Better revealed that before the product's official launch in summer, the waitlist corresponded to a potential loan volume of about $250 million, with 41% of applicants lacking sufficient cash for a down payment.
Regarding the investors for these loan assets, Garg said, "This type of asset meets bank investment standards. Multiple banks are already in line wanting to purchase and acquire these loans, including top-tier large US banks." He believes this will become a crucial channel for integrating digital assets into the banking system.
Real Costs and Collateral Rules
The collateral ratio directly determines the target audience for the product. Pledging Bitcoin requires a 250% collateral requirement. For a down payment loan of $100,000, Bitcoin worth $250,000 is needed as collateral. For the stable USDC, the collateral requirement is 125%. This product does not have a margin call mechanism; a drop in Bitcoin price does not change the mortgage loan terms. Asset liquidation is only triggered if the borrower defaults on payments for 60 consecutive days, aligning with the standards of conventional compliant mortgages.
The design logic of this mechanism is clear, targeting homebuyers who are "asset-rich but liquidity-poor." Data from real estate research firm Redfin shows that recently, 12.7% of young homebuyers have used crypto assets to fund their down payment. Data from the National Association of Realtors indicates that by the end of 2025, the median age of first-time homebuyers will reach a historic high of 40, while the proportion of first-time buyers among all homebuyers will hit a record low of just 21%. (The Mortgage Bankers Association disputes this figure, citing federal loan data). Census data shows that in Q2 of this year, the homeownership rate for those under 35 was only 35.2%.
Lending against assets that borrowers continue to hold is not a new model. Doug Ricketts, co-founder and CEO of PayJoy, stated on the podcast "On The Margin" that smartphones can play a role similar to collateral in mortgages. "Our initial innovation was using the phone as collateral; in a sense, a smartphone is like a house in a mortgage business." PayJoy provides lending services to people in Latin America, Africa, and South Asia with thin credit files. If a user defaults, the device's functions are locked—a model commonly known as digital collateral.
Ricketts has a clear bottom line for the pricing logic of collateral: "One model for lending to low-income groups is to charge extremely high interest rates, allow many users to default, and rely on a few borrowers for high returns. But that is not PayJoy's approach." PayJoy loans only charge a one-time fixed fee, with no rolling interest accumulation, which is rare in the tech-enabled consumer credit field.
Seven Senators Call for a Halt
On April 30, seven senators sent a letter to Federal Housing Finance Agency (FHFA) Director William Pulte, naming Better and Coinbase and demanding the regulator "rescind relevant approvals and prohibit government-supported enterprises from taking on crypto asset-related risks." The letter was spearheaded by Dick Durbin and Elizabeth Warren, with co-signers including Jeff Merkley, Chris Van Hollen, Richard Blumenthal, Bernie Sanders, and Mazie Hirono.
The core argument raised by the senators is precisely the 250% collateral clause that Better touts as representing risk control robustness. The letter states: "This mechanism requires homebuyers to provide crypto assets worth up to 2.5 times the down payment amount to be eligible for a loan. This itself acknowledges that crypto assets are high-risk assets; in addition, homebuyers need to pay interest on both loans simultaneously." The senators' team estimates that the combined financing cost could be up to 1.5 percentage points higher than standard Fannie Mae mortgage rates and warns: "The high burden could prompt borrowers to simply abandon their loans, with potential losses ultimately borne by American taxpayers." They requested a response from the regulator by May 30, but the FHFA has not yet publicly responded.
Alys Cohen from the National Consumer Law Center and Corey Frayer from the Consumer Federation of America jointly published a commentary in June with a more radical view: the federal government "risks repeating the mistakes that led to the 2008 foreclosure crisis." Their conclusion is that this is not consumer financial innovation but a catalyst for disaster.
Market conditions also cast a shadow over this business. Bitcoin hit a high of around $123,000 last October, fell to around $62,800 in February this year, and hovered in the $60,000 range throughout July, just half its peak value.
Garg's Long-Term Plan
Bitcoin is just the beginning. "We currently support Bitcoin and USDC, with plans to onboard various mainstream tokenized assets in the future, including equity tokens for companies like SpaceX, Tesla, Coinbase, Better, Apple, Amazon, etc." Garg said the project would not support meme coins, only selecting liquid targets with high institutional interest, with Ethereum and Solana being the next batch.
He has a further vision: parents could pledge assets from retirement accounts to help their children buy homes, aligning with the crypto asset pension track. In the future, homebuyers could simply take photos of a property and let software handle the entire process. "An AI agent submits the home purchase application on the Better platform, automatically calculating the maximum bid. In the long run, ordinary people could hold shares in properties, flexibly swapping between different houses. The only obstacle to realizing this now is the complex transaction friction."
At the core of this vision is an assessment of young people's asset allocation trends. "Young people today lack assets that can hedge against inflation and share in the benefits of rising house prices."
The Controversy Behind Token Staking
Tokenized equity businesses face a key question with no unified answer: what legal rights does holding a token actually confer? Currently, the "tokenization of everything" sector is generally plagued by this issue. Tessera founder and CEO Chan Ahn revealed on the podcast "On The Margin" that the company launched a SpaceX tokenized product in February. He candidly discussed the business model feature: "The platform deliberately does not have a KYC process; this is not an oversight." The project's original intention is to lower the barrier to entry—the private market has long kept 99.9% of ordinary investors out through cumbersome procedures, high minimum investment thresholds, and geographic restrictions.
Kula co-founder Chris Turner made a distinction on the same podcast: the vast majority of tokenized assets only represent contractual rights to asset returns, not direct ownership of the underlying asset. Another model achieves token-as-asset, where holding the token equates to owning the underlying asset. There is an essential difference between the two. For mortgage loan underwriters, when valuing collateral, they must distinguish which type of rights they are dealing with.
Meanwhile, Better is restructuring its own financing channels. In February this year, the company partnered with Framework Ventures, planning to deploy up to $500 million in funds through the stablecoin ecosystem Sky. Framework Ventures also invested $45 million for an approximately 10% stake. Better expects this adjustment to lower capital costs by more than 100 basis points. The company stated that after tokenized financing is implemented, there is an opportunity to push customer interest rates below 5%, while industry rates are generally above 6%.
The company urgently needs to lower its cost of capital. In Q1, Better originated $1.64 billion in loans, a year-on-year increase of 89%, with revenue of $47.5 million, but still incurred a loss of about $70 million. Since 2016, the company has cumulatively originated over $110 billion in loans. In December 2021, it laid off 900 employees in a single online meeting, and Garg has faced ongoing public questioning about this incident for years.
Despite the intense pressure, his determination to bet on this sector remains undiminished. "The worst-case scenario is launching the product and having no one sign up, but that's not the reality." Speaking about the industry's prospects, he said: "We don't have to just imagine the future; it's more important to create it ourselves."
