Cryptocurrency payment for mortgage transactions is a relatively new concept that is gaining popularity. The use of cryptocurrency for real estate transactions offers many benefits, including faster transactions, lower fees, increased transparency, and the ability to facilitate cross-border transactions. While there are some challenges associated with the use of cryptocurrency, these can be mitigated with the right strategies and regulatory frameworks. Michael Jansta of AltiSource and Joshua Tate of ForumPay partnered and talked about the process of crypto-to-cash payments for mortgage transactions.
Crypto Payment In Mortgage Transaction With Michael Jansta And Joshua Tate
I’m excited to have joined up with Michael Jansta. That’s pretty much the way it sounds. He’s the Chief Marketing Officer for Altisource. I’m so excited to be here at the Lenders One Conference with you and get a chance with me.
I’m excited to meet you as well.
We’re also sitting down with Joshua Tate, who’s the Cofounder and CEO of ForumPay. This is an exciting new relationship as it relates to Altisource having to do a cryptocurrency. Josh, I’m excited. First of all, could you explain to the audience how this came together, why the partnership, and how you picked ForumPay to be the partner?
ForumPay has an affiliated relationship with Altisource and we were introduced and we thought it’d be a great fit for all these people that have cryptocurrency as part of their investment portfolios to be able to use that in real estate transactions. We were discussing with Josh and ForumPay how we could make this happen in the real estate space. Cryptocurrency was blowing up all over the place. This was back in 2020, Josh. We were thinking there’s all this money in cryptocurrency. People should be diversifying into real estate. I came up with this phrase called Convert to Dirt.
In reality, we found that a lot of cryptocurrency investors were more invested in cryptocurrency and interested in other cryptocurrencies. Now, when we think about the relationship, we think about all these millions of wallets out there that have cryptocurrency in them and how we can enable those people to use those funds in a real estate transaction when they’re ready to make it.
Josh has been working with all sorts of real estate buyers on his side and other companies across the globe where people are using cryptocurrency to buy real estate and using ForumPay to convert that cryptocurrency into dollars that are going into escrow. We thought it would be a great way to cross-promote each other and work together. We could work with investors buying distressed properties or home buyers with some or a lot of crypto, how they can use that as funds for a real estate transaction, whether they’re buying that property outright or at a Lenders One conference. How do they use that as part of their down payment for an originated loan?
There are a lot of questions that start popping up. I’ll start asking in a minute about that because I’ve studied crypto. I listen to a lot of podcasts. Some of my favorite ones are on the crypto because understanding it and how it fits into the real estate market is important. Josh, tell us a little bit about the company. You’re the Cofounder of it. When did this start?
We started with the concept of ForumPay years ago. Mostly, we were trying to figure out how to make crypto interoperable amongst other types of currency, despite what the particular industry might be. We’re allowing any crypto holder anywhere in the world to be able to leverage that crypto to make purchases for everyday goods and services. The partnership with Lenders One is great because a lot of times, people will introduce me to verticals or industries where ForumPay is applicable that we may not have even discovered or opened up yet.
We had a fairly significant presence in real estate or in other payment processing environments, traditional credit card-like environments. The key was allowing the crypto consumer to use their crypto to pay, but whereby the person receiving those funds, the merchant, the title company, the seller of whatever particular goods and services are, to receive what they expected from the transaction. An instant price determination between crypto and fiat or cash at the moment, the two people come together for the purchase and the sale of particular goods or services is what ForumPay was founded upon. Interoperability amongst crypto, fiat, blockchains, and the like.
Before we got on set, you and I were talking a bit earlier. He says we’ve taken all the risk that’s there and some of the confusion, so I can’t wait to get into it. One of the issues was we had wet and dry states. In a wet state, the borrower comes to the table with funds and they’re exchanged and done right on the spot. In a dry state, a buyer may come in, pay it down, and the seller not come in for 2 or 3 days or another day and at another time, and then it won’t close. The actual settlement of funds doesn’t happen until after for a period of time.
During that time, the value of the cryptocurrency could move around. That was one of the issues that was going on, especially when it came to more of the dry funding. There was a period of time where what could happen to value? What if it fell precipitously or because there’s some volatility to all this? How are you taking the risk out of it?
Despite what type of transaction it is, we de-risk and de-volatile the cryptocurrency at the time any payment is being made. For a down payment, whether it’s in a wet or a dry state or for funds at closing, you’re effectively getting the fiat dollar amount that’s to be received. We’re converting instantly the crypto into those fiat funds at the time that payment is being made.
As soon as the transfer happens, when they put the transfer, when they go in, so let’s say it is a dry state and there’s a delay, when they put that into escrow, then it’s converted to dollars at that point. No matter when the closing may happen, the fiat normal dollars greenbacks that are sitting in that account, there’s no change.
We hope there’s no change in that. The dollar’s going to stay the dollar. The escrow company wants the dollar. They’re not looking to get the cryptocurrency itself. The service that ForumPay does is setting that exchange rate. In your point, when you’re putting that money into escrow if you’re going to your bank and you’re wiring dollars, it doesn’t matter if it’s the week before, the hour before, or the day before, as long as that money’s in the escrow account.
It’s the same thing with ForumPay, except with that volatility as the crypto owner, you might wait a day or two days and see if it goes up. If it’s starting to slide, you might say, “I want to do it right now.” It gives you the ability to push the market a little bit as well as the user, not on ForumPay’s side. They’re giving you what the exchange rate is at that point when you’re converting it into fiat and then it’s being wired into escrow. In the end, your escrow company gets the exact amount of dollars that are needed to close and it closes in cash, not crypto.
Is there another side of the transaction afterwards if one wants to go back out? Let’s say there are excess funds. They want to transfer that back out of there and flip it back into crypto. Do you accommodate that?
Sure. We can always facilitate bidirectional.
What is the big picture? Walk us through a transaction first, then where I’m going to go is how many people are going to start using this? Is this a tangential type on the side of moderate interest or is this a growing interest? I can’t wait to hear.
One of the most interesting statistics that came out about, specifically first-time home buyers in real estate, is that 11.6% of first-time home buyers in 2021 used their crypto holdings to make the down payment.
I didn’t realize it was that high.
That’s roughly 300,000 people in the US.
That was a 2022 study by Redfin. They were looking at first-time home buyers. That was about 30% of the home buyers were first-time home buyers. That doesn’t even take into account any of the other 70%, whether they were using cryptocurrency or not. They’re not buying these homes outright. It just meant that they used it as part of their purchase. It shows that there is activity.
A lot of those people probably sold their crypto and had it put in their bank account and said, “Honey, we made some money on crypto. Let’s go buy a house.” One of the big statistics we see now and one of the things that Justin talked about on the main stage was that there are 4 million-plus wallets out there that have between 0.1 Bitcoin and 10 Bitcoin. That’s from roughly about $2,200 to $220,000. That’s a lot of down payments.
Looking at the size and the scope, are there any projections on the growth of crypto as it relates to real estate transactions? Are there any studies on that you’ve come across?
At ForumPay, we’re already seeing the growth. We started in doing traditional cash closing with respect to real estate. We’ve seen month-on-month double the amount of transactions that we see come through requested to be done in crypto. Prior to our partnership with Lenders One, we were typically doing that in a cash-closing environment. They were typically higher-value transactions.
Our partnership with Lenders One meant expanding that product and the ability to bring that product to market into the actual lending brokerage mortgage space, which is where we’re pulling those statistics from. That’s the underserved market. People desperately need to have access to spend their crypto the way that they want to spend it from the trusted resource that they have. We allow a consumer, a buyer, if you will, to be able to use whatever crypto wallet they want. There’s nothing special that they have to do and be able to send the payment as easily, if not, I would argue, easier than they would send a wire.
When you start looking at the growth, some of the statistics that the MBA is putting out right now, that there are more owners of cryptocurrency in the Millennials and Gen Z-ers than there are. Granted, it covers all demographic age groups you could ever want for certain. I see that this would be something that we need to be paying attention to as we see the growth rate of Millennials going into home ownership. They’re right now sitting at about 28% or 29% if I have the statistics right. Normally for us, I’m a Baby Boomer, when we were the same age as the Millennials and Gen Z-ers are, we had as much as 60%. I bought my first home when I was 24 years old.
We look at the amount, they’ve put off the biggest purchase of their lives. I’m seeing the growth potential about the mortgage industry, which is one of the reasons I’m still bullish. I don’t care where interest rates go. We’ve got this large demographic group that’s going to be buying homes. It’s logical. It would seem to be logical, Josh, that we’re going to see a lot of them wanting to use crypto for these closings. I would think that this is a growth part of the industry and people need to pay attention to it.
We’re seeing the beginning of it now and the relationship with Lenders One and bringing it into a mortgage environment is a major next step in being able to do that. That population’s wealth in that specific asset category is growing. It’s going to become a significant portion of their wealth. If you talk about it, as you grow older and purchase more homes and have a lot more of your net worth wrapped up in your equity in real estate, so is this particular demographic in crypto. They’re going to want to be able to move interoperably between cash and crypto. That’s what we’re facilitating them doing specifically with respect to real estate.
Michael, is there anything you want to add to what he’s saying about the trends?
It makes it easier for people to transact because you might have different investments. People have their 401(k)s. You might be investing in real estate. You might have some investments in cryptocurrency. You might have most of your investments in cryptocurrency or one of these others. You might have cash in the bank in a savings account, one of these high-interest rate or savings accounts that are getting almost 4% right now.
When you need funds to do anything, whether that’s buy a car, take a trip, or buy real estate, you want to tap into those funds and you want the option to be able to use those different funds in different ways. Right now, when you think about a mortgage that’s being originated in the underwriting process, the source of those funds is very important if you want to get that mortgage approved.
If you have a bunch of cryptocurrency in your account, close on a property this month, and try to sell that cryptocurrency for cash, it’s ACH into your bank account, but it’s not seasoned funds. Whether you want to make the entire down payment in crypto or 50/50 in cash and crypto, the ForumPay option is amazing because you can say, “I want to do 50/50 on this closing for my down payment and you need $80,000. I’m going to wire in $40,000 and I’m going to send $40,000 worth of Bitcoin or Ethereum or something like that over to ForumPay.”
They convert it into cash and it gets wired in. As long as you had that crypto in your account for the 60 days, it’s looked at as seasoned funds by the GSEs so those are legitimate funds for your real estate purchase as long as you’ve held them for 60 days and it needs to be wired into a US bank account and converted to dollars for that mortgage and ForumPay provides that exact process.
The escrow company has the US bank account that’s being transferred into. You check all those boxes that are required. In the end, you needed the $80,000 into escrow, $40,000 came from cash, $40,000 came from crypto, but the $40,000 from crypto turned into cash. It’s $80,000 in cash. It closes. You have a conforming mortgage or you do it in a different way, but it provides that efficiency and ability for people to leverage the funds they have in different places.
In the process, there’s a fraud that’s going on where people get told to send funds to a different particular escrow company and it’s a fraudulent account. The money disappears, it’s out of the country and it’s gone. This doesn’t solve that risk because you’re taking the transaction to the bank. You’re converting the crypto and putting it in the bank. They still have to be careful and as diligent as ever to make sure that the money they’re wiring from the bank is into that. Is there any way that crypto can help in that or is there any further you could move further along the process so we can take out some of that risk?
Blockchain can do a lot of security functions that you cannot do with fiat or dollars. There are a lot of things that you can do with crypto and tracking the particular wallets that the cryptos had been held in terms of a source of funds issue. You can look into the history of when that Bitcoin was first mined and every wallet that it’s been in ever since. From that perspective, it is an infallible ledger of where that money has been throughout its lifecycle, which is pretty amazing.Blockchain can do a lot of security functions that you cannot do with fiat or dollars. Click To Tweet
The other part is that when ForumPay converts those funds, the consumer is getting an instruction like you would send someone and say, “Here are the wire instructions,” and send it to the title company. They say, “If you’re paying in crypto, here’s your crypto and ForumPay instructions.” They’re scanning a QR code. Those funds are then sent to a very specific blockchain address. That blockchain address is a unique blockchain address for every single transaction that ForumPay forms. It’s always unique.
This could start solving some of the risks then that are inherent in the way we are been traditionally doing this. That’s fascinating. Michael, you brought up Ethereum and the various forms of crypto that are out there. How are you handling that? Can you handle all the different forms, but virtual?
Any cryptocurrency that has a market value.
I’m so grateful that we had a chance to sit down and talk about this. Michael, I want to have you back on, because one of my favorite topics is marketing. You’re the CMO, Chief Marketing Officer, at Altisource. I want to have you back on to talk about some of the trends in marketing and some of the things that are happening. I’m thinking of ChatGPT right now which is catching the industry. It’s catching the world by storm. It’s probably one of the most searched terms. I’m playing around with it. I’ve got to ask a question. Does ChatGPT have anything to play in this world that we’re talking about right now with technology?
It does from an information standpoint. Being able to create the educational materials that people need to understand the process because it’s not rocket science. In the end, your average person doesn’t think, “How does this money get transferred into dollars and gets wired into this escrow account?” People are insurance agents and they’re managers at restaurants. They live their life and they don’t think about how this stuff works.
It’s the same thing in the whole housing industry. It’s not rocket science, but if you don’t think about it every day, you don’t know how it works. Something like ChatGPT can come up with different ways that different types of individuals can understand the education and the process to make them feel more comfortable with entering the real estate market. Also, understanding the benefits of owning real estate or as at least part of the diversification of an investment portfolio. It enables a way to get more information to more people in different ways that they can consume that information. We’re only scratching the surface of where it’s going.
This is probably one of the most exciting things. Marc Helm, the Cohost of my show, and I are obsessed with this. We’re doing a series of episodes on where this could all go. Michael, thank you so much for making the introduction to Josh. I’ve been thrilled to have you here.
This is something we’re super excited about. Thanks for having us on.
What an honor.
Thank you so much, both of you. I appreciate it.