Regulatory Changes in Mortgage Practices
The head of the Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac, has directed these mortgage giants to explore the possibility of accepting cryptocurrency holdings as part of their criteria for purchasing mortgages from banks. William Pulte issued a directive on Wednesday, asking the agencies to draft a proposal that incorporates cryptocurrencies as valid assets for reserves when evaluating risks associated with single-family home loans. He emphasized that these mortgage risk evaluations should not necessitate the conversion of cryptocurrency assets into U.S. dollars. The proposal will only consider crypto assets that are verifiable and stored on U.S.-regulated centralized exchanges compliant with relevant laws, according to Pulte’s immediate order. Pulte took up his role at the FHFA in March, and public records indicate that as of January 2025, his spouse possessed between $500,000 and $1 million in Bitcoin and a similar amount in Solana’s SOL token.
Current Trends in Cryptocurrency Home Purchases
The utilization of cryptocurrency for real estate transactions has remained relatively minimal. A survey conducted by the National Association of Realtors revealed that among homebuyers who made a down payment between July 2023 and June 2024, merely 1% reported using proceeds from cryptocurrency sales. Typically, banks have not factored in a borrower’s crypto assets until those holdings were liquidated or converted into U.S. dollars. Daryl Fairweather, chief economist at Redfin, remarked, “This is a significant victory for cryptocurrency advocates who desire equal treatment of crypto with other asset classes.”
Impact on Mortgage Lending Practices
At present, investments in stocks are recognized as qualifying assets that contribute to the reserves banks require from borrowers. However, more volatile assets like individual stocks or cryptocurrencies may be subject to discounts by lenders. Fairweather commented, “As long as lenders appropriately adjust for the volatility of cryptocurrencies, allowing them to count toward reserves is acceptable.” This shift in policy aims to motivate banks to broaden their criteria for assessing borrowers’ creditworthiness, potentially allowing more prospective homebuyers to secure loans. It also acknowledges the increasing acceptance of cryptocurrencies as an alternative investment method compared to traditional assets like bonds and stocks. The agencies are expected to submit their proposals at the earliest possible opportunity as per the directive.
Significance for the Housing Market
Fannie Mae and Freddie Mac, which have been under government management since the Great Recession, purchase mortgages meeting their risk standards from banks, thereby enhancing liquidity in the housing sector. Together, these entities back approximately half of the $12 trillion U.S. home loan market, serving as a cornerstone of the national economy. Danielle Hale, chief economist at Realtor.com, noted, “If Fannie and Freddie start accepting cryptocurrency as collateral, this could significantly influence banks to adjust their lending practices. Individuals who may have felt compelled to liquidate their cryptocurrency to qualify for a loan—possibly deterring them—might now find new opportunities under this revised policy. It effectively broadens the eligible buyer pool.”
Challenges Facing the Housing Market
The U.S. housing market has experienced a downturn since early 2022, coinciding with rising mortgage rates from the lows experienced during the pandemic. Last year, home sales fell to their lowest levels in nearly three decades, and this year has seen a continuation of sluggish activity due to high mortgage rates and increasing home prices, which have kept many potential buyers from entering the market. As of April, data from Redfin indicated that the housing market had approximately 34% more sellers than buyers.
