Crypto May Count as Asset in Mortgage Applications

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Home buyers may soon have the option to utilize cryptocurrency as an asset when applying for a mortgage.

Recently, the Federal Housing Finance Agency (FHFA) Director William Pulte instructed Fannie Mae and Freddie Mac to develop a proposal on how cryptocurrency holdings could be considered as an asset without the need for conversion into U.S. dollars during the risk assessment process for single-family home loan applications.

This directive comes at a time when the U.S. housing market is facing challenges such as high interest rates, affordability issues, and a housing inventory that remains below pre-pandemic levels, as reported by Realtor.com.

Fannie Mae and Freddie Mac are government-sponsored mortgage companies that purchase loans from lenders and repackage them as securities for investors. They were placed under federal control in 2008 during the financial crisis and are currently overseen by the FHFA. However, President Donald Trump recently announced plans to take the companies public, a move that some experts caution could pose risks to the housing market as a whole.

In a statement on X, Pulte mentioned that this directive aligns with Trump’s vision to establish the United States as the crypto capital of the world. Historically, cryptocurrency has not played a significant role in the traditional home buying process due to its volatility and regulatory uncertainties. Nevertheless, there is a growing interest in integrating cryptocurrency into real estate transactions. While only 1% of recent buyers used crypto sale proceeds for a down payment, approximately 14% intend to do so in the future, according to Redfin.

“This is a significant victory for cryptocurrency advocates who seek equal treatment for crypto assets,” stated Daryl Fairweather, Redfin’s chief economist, in an interview with the Associated Press.

In the FHFA’s directive to both agencies, Pulte also urged Fannie Mae and Freddie Mac to “consider additional risk mitigants based on their own assessments, including adjustments for market volatility,” acknowledging the inherent instability of cryptocurrency.

Together, Fannie Mae and Freddie Mac support over 60% of new mortgages in the U.S., indicating that any changes in how they evaluate assets could have a widespread impact on home buyers. Despite its potential reach, cryptocurrency remains a niche market. Only 17% of U.S. adults have engaged in crypto investments, trading, or usage, according to the Pew Research Center, a figure that has remained relatively stable since 2021. Nonetheless, with 14% of prospective home buyers planning to utilize crypto sale proceeds for a down payment, even a niche asset like cryptocurrency could have a more substantial impact on mortgage markets than its adoption rate alone might suggest.

The policy revision aims to broaden how lenders assess a borrower’s creditworthiness. Fannie Mae and Freddie Mac are now tasked with drafting proposals detailing how they will review crypto assets, subject to approval by their respective boards of directors and the FHFA before any changes can be implemented. While no specific timeline has been provided, the directive emphasizes that implementation should occur “as soon as reasonably practical.”