FHFA Director Instructs Fannie Mae and Freddie Mac to Consider Crypto in Mortgage Assets, Only Accepting Types Stored on US-Registered Exchanges with Price Adjustments.
The Director of the Federal Housing Finance Agency (FHFA) has issued a directive requiring Fannie Mae and Freddie Mac to consider borrowers' crypto assets as part of mortgage assets in single-family home loans. These government-sponsored enterprises play a role in repurchasing mortgage loans from lending institutions and restructuring them into government-guaranteed mortgage-backed securities (MBS).
In an announcement posted on social media, FHFA Director William J. Pulte declared that the enterprises need to consider price adjustments to reflect crypto's volatility and other risks, and must assess the crypto proportion in borrowers' total asset reserves.
Only crypto assets stored on registered and US-managed centralized exchanges will be accepted. FHFA hopes to receive specific proposals from Fannie Mae and Freddie Mac soon.
Mr. Pulte stated that this move aligns with "President Trump's vision of making the US the crypto capital of the world." However, this directive also sparks controversy about potential conflicts of interest. According to Associated Press, Mr. Pulte's wife owns approximately 500,000 – 1 million USD in Bitcoin and an equivalent amount of Solana SOL Tokens.
Concerns About Systemic Risks
Notably, FHFA was granted control over Freddie Mac and Fannie Mae after these institutions nearly collapsed during the 2008 global financial crisis. FHFA initially indicated that the control mechanism focused on minimizing losses, operational and credit risks of the two enterprises, while stabilizing the mortgage and housing market.
However, given crypto's characteristic volatility, many experts believe accepting crypto assets as mortgage collateral may not improve credit risk, depending on the applied haircut level. History shows Bitcoin prices typically drop 75-80% from peak to dip, while altcoins are often much worse.
Currently, Bitcoin may be even riskier as more listed companies hold BTC in their "Bitcoin Treasury", led by MicroStrategy. Allowing crypto to penetrate deeper into the traditional financial system, especially through the mortgage housing channel – the cause of the 2008 financial crisis – might concern policymakers about systemic risks.
In a context of a slowing real estate market due to high interest rates, this policy could provide a small boost to home loan demand. FHFA's new policy is announced as some mortgage lenders have proactively piloted crypto-based loan products, with Figure Technologies having implemented such a type since 2022.
