Milo is ahead of the curve, allowing clients to use bitcoin and ethereum as collateral to purchase more than $80 million in property without selling their crypto. The model lets buyers invest in real estate while maintaining exposure to the long-term growth of their digital assets.
As the mortgage landscape evolves to include crypto, Milo CEO and founder Josip Rupena spoke with HousingWire about how recent regulatory developments are influencing the company’s approach to lending. This interview has been edited for length and clarity.
Sarah Wolak: Walk me through how Milo’s crypto model works in practice.
Josip Rupena: So the way that we have our offering set up is that we’re trying to help people buy homes without having to sell their bitcoin. Traditionally, they would have to sell some bitcoin for a down payment, which would, unfortunately, trigger taxable consequences.
For a lot of borrowers, a big concern is that by selling, they would not benefit from the future appreciation of bitcoin. For a lot of us that have owned bitcoin for a while, we think it is going to be worth significantly more in the future, so that turns into something pretty costly to sell for either a down payment or even the whole home purchase.
These borrowers generally have a hard time qualifying for mortgages — not because they don’t have a lot of assets, but because they may not be able to qualify conventionally because of their income, or they’re self-employed, or they have a very different profile to a traditional person that has a really nice W-2 income. These are individuals who have a good net worth, but it’s predominantly tied to bitcoin. So our product really helps them to solve for all those elements.
The way that it’s set up is that for someone who wants to buy a million-dollar home, they’re going to post $1 million of bitcoin with Milo through our qualified custodians, Coinbase or BitGo. It’s going to sit there, and we finance 100% of the transaction. The person who’s selling the home is going to get the dollars that we send them.
SW: Obviously, the demographic is largely non-QM borrowers since they have nontraditional incomes. But are you seeing a lot of first-time homebuyers, international buyers or younger buyers? What does the typical demographic look like?
JR: Yes, it tends to be people who are first-time buyers. These are individuals who have been sitting on the sidelines for a while, primarily because they bought bitcoin when they could have bought a home. Some of them have bought homes — not to say that all of them haven’t — predominantly because the typical age range is someone in their 30s to 50s. It doesn’t mean we haven’t worked with people that are younger.
Now, for the individuals who are looking to buy their first home, they’ve decided to rent, predominantly because they want to keep holding their bitcoin. They refuse to sell it to buy real estate. But as they get older and as their life plans change — and as they start to hit different sorts of milestones in their life, like starting a family and other things like that — then the idea of buying a home becomes a little bit more important. And that’s where our product comes in.
SW: Milo announced this week that its clients have increased their wealth by more $100 million. Can you dive into the process of how Milo reached that milestone?
JR: That number has already gone up from our release. So the way we think about it is that a lot of the individuals who have decided to work with us, they haven’t sold their bitcoin and they haven’t used it for a down payment, so that means that the bitcoin that they’re holding with Milo has continued to appreciate.
So that element of them not selling their Bitcoin — and the appreciation and the savings that they’ve gotten by not having to pay taxes — that’s how we arrive at that number north of $100 million. And that number is going to continue to grow as bitcoin continues to increase. That number is going to grow to $200 million, $500 million, $1 billion over time.
We don’t really think about the success of our company just in terms of how many loans we’ve done, but in the impact that we’re having on people’s lives. In this case, your mortgage has this element that is seen as debt. You know what the cost is going to be. You know how much interest you’re going to pay over the life of the loan, which ends up being a very, very big number.
And with our product, when you look at it from a total return perspective, yes, you are paying an interest rate, but you are not paying taxes upfront and your underlying asset continues to appreciate. Whereas when someone is looking at a regular mortgage, they make a down payment, and they have an opportunity cost to that 20% or 30% down payment, and that opportunity cost might be 3% or 4% interest in money markets. If you’re an individual who holds bitcoin, that opportunity cost might be 50%, 60% or 70% per year, annualized. So it becomes very, very expensive to have to put a down payment.
SW: Given that Fannie and Freddie received the directive to prepare for crypto use in conforming mortgages, what is your take as to how that will affect demand for crypto transactions, especially as the space will also receive regulatory clarity and become mainstream?
JR: I think it’s fantastic. I think that announcement was very positive in the sense that the largest buyer of mortgages in the world is starting to look at these assets, which brings real legitimacy to the space.
The fact that the GSEs are going to be involved to some extent — even if it’s just in a more traditional sense of how they look at underwriting stocks and bonds and assets from a qualification perspective — if we can just get crypto assets to parity with that, then I think that would be a huge marker.
The way we think about our product in comparing it to their viewpoint is that we’re really trying to go one step beyond just the traditional, conventional mortgage structure. We think about it in terms of whether we’re providing the right solution for the client. In this case, they don’t want to sell their bitcoin, so we need to be able to finance 100% of the transaction. To do this, we will need more collateral. We will need to have a mechanism in place to mitigate potential defaults and non-payments. And that’s where bitcoin comes in.
So we’ve thought a little further along in the product evolution, but I do think that they’re going to make some steps to implement this, and then, hopefully, we can be that example of what a future structure could look like holistically.
SW: Considering the risk element, how does Milo manage the crypto price volatility during the process of funding 100% of the transaction?
JR: The client is actually transferring some of their bitcoin to us, so we’re able to look at the underlying wallet and at the test transaction. That allows us to have confidence in the underlying collateral that we’re holding. Whereas in the proof of satoshi method, they’re really just trying to look at the underlying assets and hopefully being able to write it, but they’re not going to actually take custody of those underlying assets and they’re going to ask them for a traditional down payment.
So it’s fundamentally different in how we’re thinking about the underlying crypto assets. In our case, the assets are going to come to us through our custodian. We’re going to hold them. We want to underwrite them and to make sure that there aren’t any issues with the underlying assets.
SW: Since Milo has been in the crypto lending space for several years now, what is there to be said about the growing opportunities and interest in the space?
JR: We’re definitely seeing more interest and an appetite to learn. And I think when we started doing some of these transactions in 2022 and we started lending, we had a lot of interest from consumers. And that continues to be the case today.
I think we’re really excited about a lot of this stance towards crypto, because it means that more capital providers can come in. With Pulte and his announcement, different institutions are looking to get exposure. And I think that if you look at real estate and your mortgages as a category, it’s massive.
I see a world where the $2.5 trillion market cap of bitcoin is only going to continue to grow. We really see that as people are starting to get wealthier, there’s going to be more transactions to be had. I think, ultimately, this is all going to be a really good outcome for consumers who are holding off on such an important life milestone: buying a home.