Cryptocurrency: Emergence of Nonbank Loan Products

YOUR QUESTION 

Substack  |  YouTube

I am the bank CFO who wrote you last year about my concerns regarding the fungibility of cryptocurrency, like that of the dollar. I was concerned and skeptical. Your response was helpful. I distributed it to our Board. Since then, I joined a nonbank as CFO. It is a large wholesale lender that has developed cryptocurrency loans – we literally use crypto to create new loan products. 

Nonbanks have much greater flexibility in cryptocurrency for product development. I have been astonished by the product rollout process and by how particularly high-net-worth and crypto-native borrowers are drawn to using cryptocurrency. I wonder how extensive this trend is spreading in the nonbank mortgage market. 

What do you think nonbanks will do to develop cryptocurrency loan products in 2026? 

OUR COMPLIANCE SOLUTION 

We suggest: 

AI POLICY PROGRAM FOR MORTGAGE BANKING™    

Our AI Policy Program aligns with Freddie Mac's AI governance requirements for Freddie Mac Sellers/Servicers. Responsible AI practices can help align AI system design, development, and use with applicable legal and regulatory guidelines.   

Our AI Policy Program consists of the following policies:  

1.    Artificial Intelligence Governance Policy 

2.    Artificial Intelligence Use Policy  

3.    Artificial Intelligence Workplace Policy  

4.    Artificial Intelligence Credit Underwriting Policy  

5.    Artificial Intelligence Do & Do Not Policy  

6.    Artificial Intelligence Ethics Policy  

7.    Artificial Intelligence Vendor Management Policy 

8.    Artificial Intelligence Mortgage Fraud Policy 

Contact us for the presentation and pricing! 

RESPONSE 

You asked a thoughtful question last year. Your main concern was that cryptocurrency had the same fungibility as the dollar. Indeed, your specific question was: "Should cryptocurrency be accepted in lieu of dollars for a down payment on mortgages?" 

Nonbanks are using cryptocurrency innovations to gain market share from traditional banks, which remain more constrained by federal safety and soundness regulations regarding crypto exposure. Coming from banking to the nonbank world, you will surely find a strong interest in developing more ways to offer new residential loan products. 

Cryptocurrency continues to grow in popularity. Nonbank mortgage lenders are the primary drivers of cryptocurrency integration in the mortgage market as of 2026. Because they operate with more regulatory flexibility than traditional commercial banks, nonbanks are using crypto to create new loan products, streamline underwriting for digital asset holders, and leverage blockchain to lower operational costs. 

I noted that you referred to two types of cryptocurrency borrowers: high-net-worth and crypto-native. I'm sure most of us know what "high-net-worth" means. 

AI has a significant role. Without AI-driven underwriting, risk modeling, and document automation, crypto mortgages would remain a niche product for wealthy borrowers. I discuss AI below. 

Many may not know what a "crypto-native" borrower is: a cryptocurrency investor with the knowledge to use crypto-financial instruments independently. That is a widely used definition, but in my opinion, it is too broad and a bit misleading, because millions of people in the crypto market should stick to the dollar. Perhaps I will discuss this type of borrower in a future article. 

Cryptocurrency is fundamentally changing mortgage banking in 2026 by shifting from a speculative niche into a recognized asset class for loan qualification and collateral. Key shifts include Fannie Mae's historic decision to accept crypto-backed mortgages and the mainstream integration of digital assets into standard underwriting processes. 

Mainstreaming Integration & New Mortgage Products 

Major financial players have introduced products that treat cryptocurrency as a legitimate financial asset rather than a liability or a "black box". 

For instance, Fannie Mae-Approved Crypto Mortgages launched on March 26, 2026, with Fannie purchasing loans in which Bitcoin or USD Coin (USDC) was used as down-payment collateral.

AI Versus Humans: A Dialogue

Substack

YOUR QUESTION 

I've read your posts on AI with considerable interest. I am the owner of a Fintech organization that provides AI to mortgage companies. My partners and I get your posts all the time. Few people in the mortgage world seem to be as honest and forthright as you. We have suggested to our clients that they sign up for your AI Policy Program. We want our customers to be fully engaged in working with AI. I am writing you about a disagreement that I have with your portrayal of AI as eventually replacing humans. 

Please engage with me in a discussion of my view. It's OK with me if you want to publish our dialogue. The more discussion, the better for everyone. But I think the gloom-and-doom perspective overlooks the nuances and is not historically valid. 

There is a fundamental error people have about AI. They look at the economy and see a fixed amount of work to be done, like a pie that can only be sliced smaller and smaller as machines take bigger bites. Critics of AI say that AI users see humans as a competitive resource to be eliminated for a finite amount of work and a finite number of problems. This is fundamentally, totally, and completely wrong. 

Does AI adversely affect jobs in the mortgage world? 

OUR COMPLIANCE SOLUTION 

We suggest:

AI POLICY PROGRAM FOR MORTGAGE BANKING™   

Our AI Policy Program aligns with Freddie Mac's AI governance requirements for Freddie Mac Sellers/Servicers. Responsible AI practices can help align AI system design, development, and use with applicable legal and regulatory guidelines.  

Our AI Policy Program consists of the following policies:  

1.    Artificial Intelligence Governance Policy 

2.    Artificial Intelligence Use Policy 

3.    Artificial Intelligence Workplace Policy 

4.    Artificial Intelligence Credit Underwriting Policy 

5.    Artificial Intelligence Do & Do Not Policy 

6.    Artificial Intelligence Ethics Policy 

7.    Artificial Intelligence Vendor Management Policy   

8.    Artificial Intelligence Mortgage Fraud Policy

Contact us for the presentation and pricing! 

RESPONSE 

I do not see AI as gloom-and-doom; however, I do recognize that it poses significant risks of many kinds. Being aware of those risks may enable preparation for remedies and mitigation of certain adverse, consequential outcomes. 

I have stated my point of view in several speaking engagements and numerous articles, some of which are: 

AI Replaced Me 

Will AI Reduce Fair Lending Violations? 

Will AI Replace Me? 

Freddie Mac Deadline: March 3, 2026 – AI Governance Framework 

Shadow AI in Mortgage Banking 

AI Credit Score Underwriting 

Visit our Compliance Topics to find more articles relating to AI. 

I will not spend time here outlining my perspective fully. For those interested, please read my articles. I always encourage questions and comments. You can contact me here. 

I will provide your views and my responses thereto. For editorial reasons, I will embolden the commenter's statements and follow them with my responses. Also, for editorial reasons, I will publish the two main theses of their opinion, thereby providing both their view and mine. I will include definitions in italics when I think a technical word requires a brief definition. Let's begin! 

Commenter's View 

This is the fundamental error of AI and job doomers. They look at the economy and see a fixed amount of work to be done, a pie that can only be sliced thinner as machines take bigger bites. They see humans as a competitive resource for a finite amount of work and a finite amount of problems to solve that must be eliminated. This is fundamentally, totally, and completely wrong.

AI Replaced Me

YOUR COMPLIANCE QUESTION

YouTube

Two weeks ago, you wrote an article titled Will AI Replace Me? When I read it, I was still employed. Well, it's two weeks later, and I have been fired and replaced by an AI bot. I am still in shock. I really did not think my job was in jeopardy. Other people in my company were also fired and replaced by AI bots.

 

Yours is the only compliance firm I have come across that explains the positives and negatives of artificial intelligence. I guess, for me, it is a big negative. I have been in the mortgage world for over twenty years. My main positions were in underwriting, processing, and closing. I have looked around for work, and nobody's hiring. I'll bet those positions are now using AI bots.

 

I don't know what to do next. I'm only forty-five. I have limited savings and a small family. I feel like I'm getting squeezed out of the mortgage industry. A group of us met with our company's COO, and she said the company is moving rapidly toward AI across its origination process. So, it looks like I'm heading for a dead end. It feels like I'm being thrown on a trash heap.

 

What is happening with these AI bots? 

Is it Us (the humans) against Them (the AI bots)?

 

Signed,

Jobless

 

OUR COMPLIANCE SOLUTION

AI POLICY PROGRAM FOR MORTGAGE BANKING™  

Our AI Policy Program aligns with Freddie Mac's AI governance requirements for Freddie Mac Sellers/Servicers. Responsible AI practices can help align AI system design, development, and use with applicable legal and regulatory guidelines. 

Our AI Policy Program consists of the following policies:  

1.      Artificial Intelligence Governance Policy

2.      Artificial Intelligence Use Policy

3.      Artificial Intelligence Workplace Policy

4.      Artificial Intelligence Credit Underwriting Policy

5.      Artificial Intelligence Do & Do Not Policy

6.      Artificial Intelligence Ethics Policy

7.      Artificial Intelligence Vendor Management Policy  

Contact us for the presentation and pricing! 

 

RESPONSE TO YOUR QUESTION

 

This is a scary time as the world embarks on this new era of AI technology. Unfortunately, unemployment will increase as AI replaces human workers. The change will not be one-for-one. In some cases, it will be far worse, as one AI bot can replace hundreds of humans on a task, especially in loan processing, underwriting, and other operational roles. I'm going to be brutally honest with you: underwriters are among the more commonly cited "at risk" roles in mortgage banking.

 

WILL AI REPLACE YOU

 

In the March 19^th article you cited, Will AI Replace Me?, the concern expressed was from a loan officer. However, I stated the following AI automations that, as implemented, would adversely affect the need for humans, as follows: 

·       AI underwriting engines can now complete the entire initial underwriting process autonomously, approving loans days faster than traditional methods. This process is probably the clearest current example of loan origination being removed entirely from human hands. 

·       Unfortunately, loan processors, underwriting assistants, compliance analysts, escrow coordinators, closing personnel, and data entry clerks are at the intersection I described above, where humans and mimicking humans reside. 

In the March 25^th article, Will AI Reduce Fair Lending Violations?, I noted, in pertinent part, that "AI can streamline underwriting, reduce operational costs, and identify creditworthy applicants that traditional credit scoring methods might overlook." 

SYSTEMIC CHANGE 

The transition is systemic, not particularized to just your company, loan products and services, region, or institutional type. From point of sale to securitization, AI is quickly becoming embedded. AI is already doing a lot of what junior underwriters used to do. And, as you know, Fannie Mae's Desktop Underwriter and similar automated systems have been handling straightforward loan approvals for years. That trend is accelerating due to artificial intelligence.

Will AI Reduce Fair Lending Violations?

YOUR COMPLIANCE QUESTION 

Our company is building an AI engine to monitor for fair lending violations. The AI system is extensive and includes chatbots. It will be integrated into our LOS and several other systems. We are a large mortgage originator and servicer. We use one of the most well-known platforms for loan originating and servicing. The system offers several new AI features. But we ran our own test against the LOS and found that our AI engine is identifying more fair lending issues than the one embedded in the LOS. 

As the company's General Counsel and Chief Risk Officer, I was shocked that building our own AI system could produce better results than a highly rated, well-established LOS. Granted, our AI system is proprietary and reflects our unique compliance needs. Full disclosure: We have been a client of yours for over 15 years, and we have discussed these and other AI findings with your team in order to mitigate compliance risk. 

I wonder if a one-size-fits-all AI integration in the LOS can really be effective, given that fair lending involves many state and federal regulations. We are testing and monitoring our AI integration, but many companies lack the resources we have and will rely on their LOS provider's results. 

Do you think a generic AI system can reduce fair lending violations? 

Signed, 

Risk Averse 

OUR COMPLIANCE SOLUTION 

AI POLICY PROGRAM FOR MORTGAGE BANKING™ 

Our AI Policy Program aligns with Freddie Mac's AI governance requirements for Freddie Mac Sellers/Servicers. Responsible AI practices can help align AI system design, development, and use with applicable legal and regulatory guidelines. 

Our AI Policy Program consists of the following policies: 

1.      Artificial Intelligence Governance Policy

2.      Artificial Intelligence Use Policy

3.      Artificial Intelligence Workplace Policy

4.      Artificial Intelligence Credit Underwriting Policy

5.      Artificial Intelligence Do & Do Not Policy

6.      Artificial Intelligence Ethics Policy

7.      Artificial Intelligence Vendor Management Policy 

Contact us for the presentation and pricing.  

RESPONSE TO YOUR QUESTION 

Let me begin with my conclusion: there is currently no one-size-fits-all, generic AI system that can be thoroughly relied on to reduce fair lending violations. 

Most companies will rely on originating and servicing platforms that integrate AI into fair lending analytics. Unfortunately, companies are generally liable for AI errors, particularly when AI causes financial losses, safety issues, or provides consumers with false information. Legal responsibility typically falls on the business deploying the technology, even if it properly monitors, tests, or ensures that the AI is fit for fair lending detection. 

Legal and Regulatory Risk 

Put another way, your business is responsible for any misinformation provided by your AI chatbots. As you likely know, there are certain aspects of tort law, like duty of care, that require individuals and entities to act with reasonable care to avoid causing foreseeable harm to others. It forms the basis of negligence claims; if this duty is breached and causes injury, the responsible party may be held liable. 

I have repeatedly said that companies must ensure AI systems are properly trained and monitored to avoid liability for errors caused by biased AI. Although developers may be liable for inherent defects, the business deploying the AI is often responsible for how the system is used. 

If you are going to use AI to detect fair lending, you must be able to identify disparate impact patterns across demographic groups, monitor for "redlining" analogs in digital lending, flag outlier decisions that deviate from modeled norms, and generate audit trails for regulatory review. 

AI is rapidly transforming the mortgage industry, promising increased efficiency, faster decision-making, and improved risk assessment. Still, its integration poses significant challenges related to fair lending compliance, data bias, and transparency. While AI can expand credit access by utilizing alternative data, it risks perpetuating historical biases if models are trained on biased data or utilize "black box" algorithms that make decisions hard to explain.

Will AI Replace Me?

YOUR COMPLIANCE QUESTION 

I have been a loan officer for fifteen years. I am a single mother of two wonderful teenagers. I have also been the breadwinner for 15 years since my husband passed away. I keep reading how AI is going to replace me. 

In the last few weeks, I've read a few articles about how AI is transforming the mortgage world. Part of that transformation looks like I am going to lose my job and be replaced by a computer program. This is so unfair. I have spent all these years building my professional life, and now I feel it is all going to be trashed. 

I heard you speak at a conference recently. You spoke about your new AI Policy Program and answered many audience questions. One of them was about how loan officers, processors, and underwriters are worried about being replaced by AI. I would like you to share your remarks in your newsletter. 

Will AI replace loan officers like me? 

Signed, 

A Human Being 

OUR COMPLIANCE SOLUTION 

AI POLICY PROGRAM FOR MORTGAGE BANKING™ 

Our AI Policy Program aligns with Freddie Mac's AI governance requirements for Freddie Mac Sellers/Servicers. Responsible AI practices can help align AI system design, development, and use with applicable legal and regulatory guidelines.

Our AI Policy Program consists of the following policies: 

1.      Artificial Intelligence Governance Policy

2.      Artificial Intelligence Use Policy

3.      Artificial Intelligence Workplace Policy

4.      Artificial Intelligence Credit Underwriting Policy

5.      Artificial Intelligence Do & Do Not Policy

6.      Artificial Intelligence Ethics Policy

7.      Artificial Intelligence Vendor Management Policy 

Contact us for the presentation and pricing.  

RESPONSE TO YOUR QUESTION 

REVOLUTION AND EVOLUTION 

There have been many technological revolutions in human history. We are now at the advent of another revolution: the onset of artificial intelligence (AI) technology, a massive, incremental, worldwide expansion of knowledge in computer science dedicated to creating systems capable of performing complex tasks that typically require human intelligence. Each revolution has brought about profound changes in civilizations. Surges in technological development have characterized each revolution. 

From stone-age tools to learning to control fire, from foraging for food to the first agricultural revolution, from replacing bronze with iron, each stage of technical knowledge enabled widespread human development at the cost of some trade-off in the human social experience that had evolved heretofore. The printing press brought about mass production of books, democratizing knowledge and literacy; the scientific revolution shifted knowledge from philosophy to evidence-based insights; new farming techniques led to increased food output, population growth, and urbanization. 

And, of course, we all know of the industrial revolution, where machine-based manufacturing shifted society away from manual labor; this was then followed by the technical revolution, where mass production became deeply entrenched in lived experience, such as the creation of assembly lines, steel-making methodologies, and the application of electricity, internal combustion, and telecommunications. Over the last 100 years, the green revolution has introduced high-yielding crops, industrial fertilizers, and new agricultural technologies, thereby increasing global food production. 

Which Revolution Are We In Now? 

So, where are we now in the scheme of things? 

In my view, we are currently living in the information and digital revolution, but rapidly transitioning to the artificial intelligence revolution. We are living at a time when computers and transistors, the Internet, personal computing, and smartphones are being rapidly replaced by the artificial intelligence revolution, characterized by discoveries such as gene editing, advanced robotics, and nanotechnology.