Crypto and Your Mortgage: New Rules Could Allow Digital Assets in Home Loan Assessments
A potential shift in home lending is underway, as federal regulators consider allowing cryptocurrency holdings to be factored into mortgage applications. This move, impacting the roughly 15% of Americans invested in digital assets, could open doors to homeownership for some while raising concerns about market stability.
The Federal Housing Finance Agency (FHFA) issued a directive in June ordering mortgage giants Fannie Mae and Freddie Mac to develop proposals for evaluating crypto as an asset during risk assessments for single-family home loans. The agency’s director signaled the change was the result of extensive study and aligned with a broader vision. “This directive came after significant studying, and in keeping with President Trump’s vision to make the United States the crypto capital of the world,” he wrote in a post on X.
The potential change in policy has sparked debate among industry experts and lawmakers.
How Crypto Could Factor Into Mortgage Approval
Currently, mortgage lenders primarily assess risk based on traditional financial indicators like salaries, bank balances, and retirement accounts. This process typically excludes digital assets. However, the FHFA’s directive aims to integrate crypto into the existing framework.
According to a leading economist, the process would mirror how lenders currently evaluate stocks and other investments. “A lender would look at the assets that a potential borrower has, and before, they might have only considered stocks and bonds and those traditional kinds of investments, but now they would consider those less traditional cryptocurrency investments,” the economist explained. “It might be a bit difficult for them to assess the riskiness, but I think they’re used to assessing the riskiness.” The expert further noted that some cryptocurrencies may be less volatile than certain stocks, suggesting lenders could adapt their existing risk assessment models.
Legislative Support and Concerns
The move from the FHFA quickly garnered support from some in Congress. Senator Cynthia Lummis, R-Wyo., introduced legislation to formally codify the directive into law, signaling bipartisan interest in embracing digital assets within the housing market.
However, the proposal has also faced criticism. In July, a group of Democratic senators sent a letter to the FHFA director expressing concerns about the potential risks of backing loans with crypto. They argued that the inherent volatility of crypto assets could introduce instability into the home lending market and requested more information regarding the agency’s decision-making process. The senators emphasized the need for a thorough understanding of the potential benefits and risks before implementing such a significant change.
The debate highlights the complex considerations surrounding the integration of digital assets into traditional financial systems. As the housing market continues to navigate affordability challenges – the average U.S. home sales price has hovered around $400,000 since the end of 2021, according to the Federal Reserve Bank of St. Louis – the potential impact of this policy shift remains to be seen.
