Potential for Crypto in U.S. Mortgages

Bill Prute, who is in charge of major housing entities Fannie Mae and Freddie Mac, hinted that U.S. home buyers might soon leverage cryptocurrency to enhance their mortgage applications.

In his recent announcement, he stated, “After significant studies and in line with President Trump’s vision of making the U.S. the crypto capital of the world, I’ve instructed Fannie Mae and Freddie Mac to get ready for counting cryptocurrency as mortgage assets.”

This marks a notable shift for Fannie and Freddie, which together back over half of all mortgages in the U.S. Just a couple of years back, under the Biden administration, these agencies had issued guidance stating that income from cryptocurrency couldn’t qualify a borrower for a mortgage. The reasoning? The inherent instability tied to crypto assets.

Interestingly, back during Trump’s first term, he was more skeptical about digital currencies. However, he has shifted his views since then and even has his own brand of digital tokens. Additionally, his family has investments in a crypto venture named World Liberty Financial.

Pulte’s new directive could be a game changer for prospective buyers who wish to retain their cryptocurrency instead of converting it into U.S. dollars for mortgage qualification. This development coincides with soaring home prices—a recent report showed record highs in May—and persistently rising average mortgage rates.

Just last month, Trump expressed intentions to take Fannie and Freddie public, which might mark the end of a 17-year federal oversight of these entities. They play a crucial role in the housing finance sector by pumping liquidity into the mortgage market.

However, there’s caution from some experts regarding the implications of this prospective move, suggesting that it could lead to increased borrowing costs for home buyers.

Fannie and Freddie’s role involves purchasing mortgages from lenders and reassembling them for investors. It raises a concern: if the government doesn’t guarantee bailouts, like it did during the 2008 financial crisis, lenders might start charging higher fees to make up for the added risks.

Moreover, it remains uncertain how accepting cryptocurrency for mortgage-related income will affect perceptions of risk tied to Fannie and Freddie, especially considering the volatility of cryptocurrencies.

Pulte has tasked his team with developing a plan to accept cryptocurrencies as mortgage assets. However, any proposals would require approval from both the board of directors and the Federal Housing Finance Agency (FHFA) before implementation.

In his directive, Pulte emphasized that Fannie and Freddie “should explore additional risk mitigators according to their assessments, including adjustments for market volatility.”