Trump administration moves to count crypto as a federal mortgage asset

In a significant development for the American housing finance landscape, the Federal Housing Finance Agency (FHFA) has issued a directive that mandates Fannie Mae and Freddie Mac to recognize cryptocurrency as a legitimate asset in their assessments for single-family mortgage loans. This directive, signed by FHFA Director William J. Pulte, marks a pivotal moment in the integration of digital currencies into the traditional financial framework, particularly within home lending. The new policy requires both housing finance companies to devise proposals that incorporate digital assets, allowing borrowers to retain their crypto without converting it to U.S. dollars before securing a loan. Pulte emphasized the importance of this move in a post on X, stating that it aligns with former President Donald Trump's ambition to position the United States as the leading hub for cryptocurrency. Historically, cryptocurrencies faced exclusion from underwriting criteria due to their volatile nature, regulatory ambiguities, and challenges in verifying reserves. This new directive aims to address those issues. As institutional acceptance of cryptocurrencies grows within the realms of banking, payments, and federal regulations, this decision recognizes the potential of crypto as an emerging asset class. The order highlights that digital currencies could provide wealth-building opportunities beyond traditional stock and bond investments. However, the directive stipulates that only digital assets stored on U.S.-regulated, centralized exchanges and easily verifiable will be considered. Fannie Mae and Freddie Mac are also instructed to implement internal measures to account for the market volatility of cryptocurrencies, ensuring that any risk-weighted reserves containing crypto do not undermine lending standards. Both agencies are required to present their proposals for assessment to their boards of directors and seek final approval from the FHFA. It is noteworthy that Fannie Mae and Freddie Mac have been under government control since September 2008, operating as government-sponsored enterprises (GSEs).