Senators Investigate FHFA’s Plan to Include Cryptocurrency in Mortgages
A group of Democratic senators has launched an investigation into a proposal by William Pulte, the head of the Federal Housing Finance Agency (FHFA), to include cryptocurrency as an asset in mortgage lending assessments. The plan, which seeks to allow Fannie Mae and Freddie Mac to account for crypto assets when evaluating mortgage risk, has raised significant concerns among lawmakers regarding the potential volatility and stability of the housing market.
In June 2023, Pulte announced his intention to enable Fannie Mae and Freddie Mac to recognize cryptocurrency as an acceptable asset for single-family home mortgage assessments. While some Republican officials expressed support for this initiative, a coalition of Democratic senators, led by Jeff Merkley, has responded with caution. Other senators involved in the inquiry include Elizabeth Warren, Bernie Sanders, Chris Van Hollen, and Mazie K. Hirono.
Concerns Over Volatility and Risk
In a letter directed to Pulte, the senators urged him to provide additional information regarding the implications of his proposal. They highlighted the inherent volatility associated with cryptocurrencies and referenced concerns raised by consumer advocates about the risks of linking a “lightly regulated and highly volatile investment asset” to the housing market, which plays a crucial role in the broader economy.
“The 2008 crisis proved that lax financial practices around risky investments can blow up the housing market—and hardworking families in Oregon and across the country paid the price. Crypto poses serious risks to the stability of the housing market. This is a risk we must address,” said Senator Merkley.
The letter noted a report from Fannie Mae at the end of 2024, which categorized crypto, private coins, and stablecoins as the “least appealing application” for blockchain technology. The lawmakers expressed concern over a component of Pulte’s proposal that suggests crypto could be considered as an asset without the need for conversion to traditional currency. “Expanding underwriting criteria to include the consideration of unconverted cryptocurrency assets could pose risks to the stability of the housing market and the financial system,” the letter stated.
Liquidity and Conflict of Interest Issues
The senators also raised issues regarding the liquidity of cryptocurrency markets. A report from the Corporate Finance Institute described the crypto market as “far from being as large and liquid as other financial markets that professional investors would normally participate in.” They emphasized that the high volatility of cryptocurrency could endanger homebuyers, as a borrower utilizing crypto may struggle to convert it to cash at a price that mitigates the risk of defaulting on a mortgage.
Additionally, the letter expressed concerns about potential conflicts of interest involving Pulte and other officials associated with the Trump administration who have ties to the cryptocurrency sector. The senators warned that such conflicts might “unduly influence their proposals” regarding future policies. “You are the current Chair of each Board, and you have stacked the Boards with members who represent FHFA personnel and your industry allies,” they wrote, addressing Pulte directly.
As this investigation unfolds, the senators aim to clarify the potential impacts of integrating cryptocurrency into mortgage lending, with a focus on protecting the stability of the housing market and safeguarding consumers from the risks associated with volatile investments.
