US Federal Housing Regulators to Evaluate Impact of Cryptocurrency on Mortgage Applications
Federal housing regulators to review how cryptocurrency assets may influence mortgage qualifications, impacting Fannie Mae and Freddie Mac policies.
Federal housing regulators are poised to explore the potential impact of cryptocurrency holdings on American mortgage applications. This initiative, headed by the Federal Housing Finance Agency (FHFA) Director Bill Putle, is set to determine how crypto assets might be integrated into income assessments by key mortgage entities such as Fannie Mae and Freddie Mac.
In a recent announcement on social platform X, Director Putle revealed that the FHFA will scrutinize the role of cryptocurrency in mortgage qualifications. This move reflects a broader trend in the United States, which has shown an increasing receptivity to the cryptocurrency sector under President Donald Trump's administration.
Director Putle, who reportedly owns up to $1 million in cryptocurrency and holds stakes in MARA Holdings and Elon Musk's X, underscores the growing significance of digital assets in financial ecosystems. Currently, Fannie Mae and Freddie Mac stipulate that virtual currency can only be utilized for closing and reserves if converted into U.S. dollars and maintained in a regulated financial institution. Adequate documentation must confirm the source of these funds.
This development aligns with a notable shift in the financial industry, as major banks begin to recognize bitcoin as a viable form of collateral. PYMNTS recently reported a rise in the use of bitcoin for determining applicants' net worth and liquidity, consequently influencing loan terms. For instance, J.P. Morgan and Goldman Sachs have embraced bitcoin as collateral for loans, with J.P. Morgan offering loans backed by bitcoin ETFs.
MacroStrategy, a subsidiary of MicroStrategy, exemplified this trend by securing a $205 million loan from Silvergate in 2022, backed by $820 million in bitcoin. However, regulatory filings highlight the inherent risks, such as the potential need for borrowers to deposit additional bitcoin or prepay loans if the loan-to-value ratio exceeds 50% due to price fluctuations.
As the FHFA delves into how cryptocurrencies could affect mortgage applications, the financial landscape continues to evolve, reflecting the dynamic interplay between traditional financial systems and emerging digital currencies.