Lawmakers Challenge U.S. Federal Housing on Crypto-Backed Mortgage Assets

Senators Sherrod Brown (D-Ohio) and Elizabeth Warren (D-Mass.) sent a July 24 letter to Federal Housing Finance Agency (FHFA) Director William Pulte requesting details on his June 25 order. The directive instructs Fannie Mae and Freddie Mac to include crypto holdings in borrowers' asset calculations.

Under existing rules, Fannie Mae and Freddie Mac must consider only cash or equivalent assets when purchasing mortgages. The new directive tells them to propose how to treat unconverted cryptocurrency holdings on U.S.-regulated exchanges as part of borrowers' reserves.

The senators questioned the adequacy of risk assessments carried out before the order and sought clarity on how underwriting guidelines will address crypto volatility and consumer disclosures. They requested documents and analyses related to the directive.

The lawmakers noted that Fannie Mae's own research flagged crypto-based deposits and collateral as among the “least appealing applications” of blockchain technology due to price swings. They asked for models showing how different valuation approaches would impact loan performance and the agencies' balance sheets.

To the extent that historical volatility and liquidity persists even as the market matures, a borrower using crypto faces an increased risk that they may not be able to exit a crypto position and convert to cash at a price that would allow them to buffer against risk of mortgage default. Crypto is also subject to heightened risks of loss due to scams, cyber hacks, or physical theft, which could leave homeowners vulnerable to losing their crypto assets with little hope of recovery,

the senators wrote, emphasizing the need for transparency before policy implementation.

The senators also requested correspondence between FHFA and the Mortgage Bankers Association, fintech firms, or state banking regulators concerning the order. They asked for copies of stakeholder feedback and compliance timelines proposed by Fannie Mae and Freddie Mac.

Only about 1% of home purchases in 2023-24 used crypto proceeds, typically converted to dollars first. Banks have historically limited crypto use in mortgages under previous policies.

Fannie Mae and Freddie Mac must now submit formal proposals outlining implementation details, including valuation methods, haircut percentages, and disclosure requirements. Those proposals will guide lenders nationwide.

The committee requested responses by August 15. Taxpayers remain liable for credit risk if mortgages backed by crypto-qualified assets default, prompting lawmakers to demand rigorous analysis before implementation.