Better taps crypto funding to target sub-5% rates

Better is turning to crypto-linked capital to fund as much as $500 million in mortgages, betting the move can double originations and eventually push borrower rates below 5%. 

The lender is partnering with Framework Ventures to tap funding through the Sky stablecoin ecosystem, positioning the platform as an alternative source of warehouse liquidity backed by originated assets. CEO of Better Vishal Garg said the tokenized structure is intended to lower financing costs, expand lending capacity and create a new yield channel tied to U.S. housing credit.

Sky allocates capital across various "Stars" in multiple sectors, who then deploy it to generate yield and funnel the earnings back into the Sky ecosystem. Better is Sky's home finance Star, an independent decentralised project within the ecosystem.

"We believe tokenization has the potential to unlock efficiency and global liquidity in housing finance, one of the largest asset classes in the United States," Garg said in the release. "We will be the first conforming mortgage originator to deploy tokenized capital to responsibly support mortgage assets at institutional scale."

Better's integration into the Sky ecosystem "could be a win for all parties," said Vance Spencer, cofounder of Framework Ventures, in a press release Monday. 

"With this capital injection, we think Better will be able to rapidly scale origination and potentially lower mortgage rates for consumers in the long-term. At the same time, bringing Better on as a Star would give the Sky stablecoin ecosystem a powerful and differentiated new source of yield," he added.

Better plans to integrate into the ecosystem through Obex, a Sky-focused incubator administered by Framework Ventures and backed by $2.5 billion, the release said.

The integration will lower costs for Better and partners of its Tinman AI platform, Better's loan origination system, and their customers by more than 100 basis points per year, Garg said.

Better will have full responsibility of underwriting and loan origination, while the Star will provide the lender with an alternative source of warehouse funding, which would be secured by originated assets and would not increase its balance sheet risk profile, the release said.

Better's plan could eventually translate into sub 5% interest rates for borrowers, while the rest of the industry charges more than 6%. It could also lower the capital requirements to finance Better's growth plans of scaling from $500 million per month in originations to over $1 billion this year, the release said.

"All this while providing token holders with yields well above current Stablecoin yield or rewards with superior credit risk," Garg said. "We're just getting started."