Fannie Mae, Freddie Mac To Consider Crypto in Mortgage Apps
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One of the most challenging things for first-time homebuyers is qualifying for a mortgage. Now, folks who have dipped their toes in the cryptocurrency game may soon have a little better luck qualifying if they borrow from Fannie Mae or Freddie Mac.
William J. Pulte, director of the Federal Housing Finance Agency (FHFA), recently ordered the two government-controlled banks to “prepare a proposal for a consideration of cryptocurrency as an asset for reserves in their respective single-family mortgage loan risk assessments, without conversion of said cryptocurrency to U.S. dollars.”
Given that Fannie Mae and Freddie Mac back more than 50% of mortgages in the country, the move could be a significant step forward for the crypto industry, which has fought over the last several years to legitimize itself in the eyes of financial institutions and the broader public.
While crypto is regulated to a certain degree in the United States, the rules governing its use as a security or commodity are still evolving and not uniform. Gaining recognition as a valid asset class by lenders without being turned to cash would be groundbreaking, especially considering how volatile cryptocurrencies have been historically.
That very volatility has been a source of institutional conservatism on the lending front, despite the fact that some big names started to buy Bitcoin as a reserve asset and offer crypto services in recent years. The relative stabilization of Bitcoin, however, along with major support from the Trump administration, may open more doors for the integration of cryptocurrency into Americans’ financial life.
Younger folks, who are more likely to hold some kind of cryptocurrency, may stand to benefit from Pulte’s directive depending on how Fannie Mae and Freddie Mac decide to factor crypto as an asset in their risk assessments. Still, it’s unclear how many individuals will really be empowered to break into the single-family home market under whatever new rules get developed.
One key stipulation in the FHFA director’s order is that the banks can only consider cryptocurrencies that can be “evidenced and stored on a U.S.-regulated centralized exchange.” They are also directed to take into account market volatility and the share of crypto in a mortgage applicant’s reserves, which does suggest (at least to me) that the lenders may hedge against this new asset class.
