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Crypto payment in Mortage transaction with Michael Jansta and Joshua Tate
David Lykken: Listeners, I'm excited to have joined up with Michael Jansta, pretty much just the way it sounds. He's the Chief Marketing Officer for AltiSource. So excited to have me here at the Lenders One Conference with you and get a chance to meet.
Michael Jansta: Yeah, I'm excited to meet you as well.
David Lykken: And now we're also sitting down with Josh Tate, who's the co-founder and CEO of ForumPay, and this is an exciting new relationship as it relates to Altisource having to do a cryptocurrency, Josh, so I'm really excited. First of all, if you could explain to the listening audience how this came together, why the partnership, and how is it that you picked forum pay to be the partner?
Michael Jansta: ForumPay has an affiliated relationship with AltiSource. And we were introduced, and we thought it'd be a really 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. And we were discussing, with Josh and ForumPay, how could we make this happen in the real estate space because cryptocurrency was blowing up all over the place. This was back in 2020. And we were thinking, there's all this money in real estate. People should be diversifying, or in cryptocurrency, they should be diversifying into real estate. And I came up with this phrase called “convert to dirt” But in reality, we found that a lot of cryptocurrency investors were really more invested in cryptocurrency and in being interested in other cryptocurrencies. And today when we think about the relationship, we think about all these millions of wallets out there that just have cryptocurrency in them, and how can we enable those people to use those funds in a real estate transaction when they're ready to make one? And 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. And so, we thought it would be a great way to cross-promote each other and work together. So that we could work with investors that are buying distressed properties or home buyers that have some crypto or a lot of cryptos. 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 is like, how do they use that as part of their down payment? For an originated loan.
David Lykken: Wow. There are a lot of questions that start popping up. I'll start asking in just a minute about that because I've studied the crypto. I listened to a lot of podcasts as a podcaster. I listen to a lot of podcasts. Some of my favorite ones are on the crypto because it's understanding it and how that fits into the real estate market is really important. But Josh, tell us a little bit about the company you're the co-founder of it, so when did this start?
Joshua Tate: We started the concept of Forum Pay probably around four years ago. Mostly trying to figure out how to make crypto interoperable amongst other types of currencies. Despite what the particular industry might be allowing any crypto holder anywhere in the world to be able to leverage that crypto to make purchase for everyday goods and services. The partnership with Lenders One is great because there's a lot of times that people will introduce me to verticals or industries where forum pay is applicable that we may not have even really discovered or opened up yet. So, we had fairly significant presence in real estate or in other payment processing environments, traditional credit card-like environments. But the key was really allowing the crypto consumer to be able 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 out of the. So, 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 a particular goods or services is what ForumPay was founded upon. So, interoperability amongst crypto, fiat, blockchains and the like.
David Lykken: Very interesting. Now, one of the things that I read that was an objection or was one of the things that had to be overcome and just before we got on set, you and I were talking a bit earlier and he says, we've taken all the risk. That's there and that and some of the confusion, so I can't wait to get into it. But one of the issues was like we have 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, paid down, and the seller not come in for two, three days and then or another day and at another time. And then, close and 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 and that was one of the issues that was going on, especially when it comes to more of the drive fundings, where there was a period of time where what could happen to the value, what if it fell precipitously or because there's some volatility to all this. So how are you taking the risk out of it?
Joshua Tate: Despite what type of transaction, it is, we de-risk and de-volatile, if you will. The cryptocurrency at the time any payments being made. Okay, so for a down payment, whether it's in a wet or dry state for funds at closing, you're effectively getting the fiat dollar amount that's to be received is being received. We're converting instantly the crypto into those fiat funds at the time that payment is being made.
David Lykken: So 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. So, no matter when the closing may happen, the fiat, normal dollars greenbacks that are sitting in that count, there's no change. We hope there's no change in value on that, right.
Michael Jansta: The dollar's going to stay the dollar, right? and the escrow company wants the dollar. They're not looking to get the cryptocurrency itself. And so, the service that forum pay does really setting that exchange rate. In your point, like when you're putting that money into escrow, if you're just going to your bank and you're wiring dollars, it doesn't matter if it's the week before or the hour or the day before. As long as that money's in the escrow account and it's the same thing with ForumPay, except with that volatility as the crypto owner. You might wait a day and see if it goes up, or you might wait two days and see if it goes up. And if it's starting to slide, you might say, hey, I want to do it right now. And it gives the ability to leverage the market a little bit as well as the user on the ForumPay side, right? They're just giving you what the exchange rate is at that point when you're converting 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.
David Lykken: Is there another side of the transaction afterwards? If one wants to go back out, let's say there's excess funds, they want to transfer that back out of there and flip it into back into crypto. Do you accommodate that?
Joshua Tate: Sure. We can always facilitate the bidirectional crypto.
David Lykken: All right good. That's fascinating. So, what is the big picture? walk us through a first of transaction, then where I'm going to go is how many people are going to start using this? Is this just tangential type, you mean? I think on the side of moderate interest, or is this a growing interest? Can't wait to hear it.
Joshua Tate: I think 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 holdovers are used to make the down payment. That's roughly 300,000 people in the US.
Michael Jansta: And that was a 2022 study by Redfin, and they were looking at just at first-time home buyers. And so that was about 30% of the home buyers and were first-time home buyers. So that doesn't even take into account, any of the other 70%, whether they were using cryptocurrency or not, and that they're not buying these homes outright, it just meant that they use it as part of their purchase. But it shows that there is activity and a lot of those people sold their crypto and had it put in their bank account and said, interesting. Hey, honey, we made some money on crypto. Let's go buy a house and one of the big statistics we see today, and one of the things that Justin talked about on the main stage this morning was that there's 4 million plus wallets out there that have between 0.1 Bitcoin and 10 Bitcoin. And that's rough. $2,200 to $220,000 and that's a lot of down payments.
David Lykken: That's a lot of down payments. very exciting, looking at the size and the scope. Is there any projections on the growth of crypto as it relates to real estate transactions? any studies on that you've come across?
Joshua Tate: At Forum Pay, we're already seeing the growth. We started in just doing traditional cash closing with respect to real. Probably six to eight months ago, and we've seen month to month, double the amount of transactions that, that we see come through requested to be done in crypto. Now, prior to our partnership with Lenders One, we were typically just doing that in a cash-closing environment. And they were typically higher-value transactions. Our partnership with Lenders One went meant really 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 easy. If not, I would argue easier. Easier than they would send a wire.
David Lykken: So that's really fascinating, and then when you start looking at the growth, like some of the statistics that the MBA is putting out right now, that the millennials, which is where a lot of the crypto part of the market were there more crypto owners of cryptocurrency in the millennials and Gen Z’ers than there are now granted it covers all demographic age groups you could ever want for certain, but I see that this would be something as 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 28-29% if I have the statistics. Normally for us, I'm a baby boomer, we were at the same age as the millennials and Gen Zers are we had as much as a 60%. I bought my first home when I was 24 years old, and we look at the amount they put off the biggest purchase of their lives. So, I'm seeing the growth potential, which is one of the reasons I'm still bullish I don't care where interest rates go about the mortgage industry, and I think it's just we've got this large demographic group that's going to be buy homes. It's logical. I would seem to be logical, Josh, that we're going to see a lot. Wanting to use crypto for these closings. So, I would think that this is a growth part of the industry and people need to pay attention to it.
Joshua Tate: I think we're just seeing the beginning of it now and in the relationship with Lenders One and actually 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 world. So, if you talk about, as you grow older and purchase more homes and have a lot more of your net worth wrapped up in real estate and your equity in real estate, so is this particular demographic in crypto and they're going to want to be able to move interoperability between cash and crypto and that's what we're facilitating them doing specifically with respect to real estate.
David Lykken: Michael, anything you want to add to what he's just saying about the trends?
Michael Jansta: I think it just makes it easier for people to transact because you might have different investments, right? People have their 401ks. 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 mortgage or savings accounts that are getting almost 4% right now and when you need funds to do anything, whether that's buy a car or 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. And right now, when you think about a mortgage that's being originated and the underwriting process, the source of those funds is very important, if you want to get that mortgage approved. And so, if you have a bunch of cryptocurrency in your account and you want to close on a property, this month and you try and sell that cryptocurrency for cash, it gets ACH into your bank account, but it's not seasoned funds, right? So, whether you want to do the entire down payment in crypto or 50-50 in cash in crypto, the ForumPay option is amazing because what you can do is you can say, okay, I want to do 50-50 on this closing for my down payment, and you need 80 grand. I'm going to wire in $40k and I'm going to send $40k worth of Bitcoin or Ethereum. That was just, 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 that those are legitimate funds for your real estate as long as you've held them for 60 days and needs to be wired into a US Bank account and converted to dollars for that mortgage and ForumPay provides that exact process, and then the escrow company has the US Bank account that's being transferred into. So, you check all those boxes that are required, right? In the end, you needed the 80 grand into escrow. 40 came from cash, 40 came from crypto, but the 40 from crypto's turned into cash. So, it's 80 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.
David Lykken: Does this take any I'm thinking of the process and there's fraud that's going on where people get told to send funds to an account. They're making think that they're sending the funds to a particular escrow company and it's a fraudulent account. The money disappears. It's out of the country and it's gone. This really doesn't solve that risk because you're taking the transaction to the bank. You're converting the crypto and putting 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 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?
Joshua Tate: Blockchain can do a lot of security functions that you cannot do with fiat or dollars. So, there's a lot of things that you can do with crypto and tracking the particular wallets that the cryptos being had been held in. In terms of a source of funds issue. Yeah. So, you can look into the history of when that Bitcoin was first mind and it every wallet that it's been in ever since. So, from that perspective, it is an infallible ledger of where that money has been throughout its life cycle. Which is pretty amazing. The other part is that when ForumPay is converting those funds, the consumer literally is getting an instruction. Just like you would send someone and say, here are the wire instructions into the title company. They're saying, or if you're paying in crypto, here's your crypto instruct, your ForumPay instructions. They are scanning a QR code. Those funds are then being sent to a very specific blockchain address, that blockchain address is a unique blockchain address for every single transaction that ForumPay forms. So, it's always unique.
David Lykken: This actually could start solving some of that risk then that's inherent the way we are been traditionally doing this. That's fascinating. Michael, you brought up Ethereum and the various forms of crypto that's out there. How are you handling that? You can handle all the different form.
Joshua Tate: definitely any cryptocurrency that has a market value.
David Lykken: That's fascinating. 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 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 a ChatGPT right now is catching the industry, it's catching the world by storm. It's probably one of the most search terms I'm playing around with it. I just got to ask a question. Does ChatGPT have anything to play in this world that we're talking about right now with technology?
Michael Jansta: I think it does from an information standpoint and being able to create the educational materials that people need to understand the process because it's not rocket science. But in the end, your average person doesn't think. Okay, 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 and, 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 and so something like ChatGPT can come up with different ways that different types of individuals can understand the education and just the process to make them feel more comfortable with entering the real estate market and understanding the benefits of owning real estate over 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, that they can consume that information, we're only like, scratching the surface on where it's going.
David Lykken: Yes, this is probably one of the most exciting things. I'm 72 years old. My co-host on my podcast here is Marc Helm and he's 72. We were obsessed with this. We're doing a series of podcasts on where this could all go. Michael, thank you so much. Encouraging me to or making the introduction to Josh and just been thrilled to have you here.
Michael Jansta: Yeah, there's something we're super excited about. Thanks for having us on.
David Lykken: Yeah, what an honor. Thank you so much, both of you. Appreciate it.
Joshua Tate: Thanks David. Appreciate it.
David Lykken: Thank you, Michael. Appreciate it. Pleasure. You bet.
Important Links
About Michael Jansta
Michael Jansta is the Chief marketing officer at Altisource, an integrated service provider and marketplace for the real estate and mortgage industries. He has more than 15 years of real estate industry experience and is an expert at leveraging technology to facilitate online property auctions. He previously served as the general manager of Altisource subsidiary Hubzu, an online real estate marketing platform that has facilitated sales of more than 229,000 U.S. homes.
About Joshua Tate
He co-founded ForumPay empowers consumers to purchase goods and services using their preferred cryptocurrency with their preferred wallet, while seamlessly enabling the Merchant to receive payments for those goods and services in their preferred currency in their preferred bank account. Merchants will receive the sales price in the currency of their choice securely and without delay.
In 2019, Tate founded Forum Pay, with the goal of creating a payment processing platform that would leverage the benefits of cryptocurrency. Forum Pay's platform allows merchants to accept cryptocurrency payments, which can be processed quickly and securely, without the need for intermediaries such as banks.