U.S. Sens. Jeff Merkley and Elizabeth Warren, Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee, Chris Van Hollen, Mazie Hirono, and Bernie Sanders have sent a letter to William Pulte, the Director of the Federal Housing Finance Agency (FHFA), raising concerns about his recent order directing Fannie Mae and Freddie Mac (GSEs) to submit proposals that would allow mortgage lenders to account for unconverted cryptocurrency assets in the underwriting process.
The move to cryptocurrency, as voiced by the senators, could introduce unnecessary risks to consumers and pose serious safety and soundness concerns for the U.S. housing and financial markets.
“Under current policy, neither the Enterprises, nor any other channel for federally-backed, insured, or guaranteed mortgages, permit mortgage lenders to consider cryptocurrency when determining whether they can afford a mortgage, unless that cryptocurrency has been converted to U.S. dollars and is accompanied by appropriate documentation,” wrote the Senators in the letter. “Expanding underwriting criteria to include the consideration of unconverted cryptocurrency assets could pose risks to the stability of the housing market and the financial system.”
In late June, Pulte announced a ground-breaking initiative, the FHFA investigating how cryptocurrency holdings impact mortgage eligibility. Pulte’s remark corresponds with the U.S.’ growing embrace of cryptocurrency under President Trump. According to public records, Pulte holds up to $1 million in bitcoin.
For cryptocurrency assets to be taken into consideration, Fannie Mae and Freddie Mac now stipulate that they must be “exchanged into U.S. dollars and is held in a U.S. or state regulated financial institution.”
“After significant studying, and in keeping with President Trump’s vision to make the United States the crypto capital of the world, today I ordered the Great Fannie Mae and Freddie Mac to prepare their businesses to count cryptocurrency as an asset for a mortgage,” said Pulte via social media.
In their letter, the lawmakers questioned the conflict of interests, including between the Trump Administration, the cryptocurrency industry, and the Enterprises’ Boards.
“Your order states that ‘each Enterprise must submit and receive approval from its Board of Directors.’ However, you are the current Chair of each Board, and you have stacked the Boards with members who represent FHFA personnel and your industry allies. While the legality of your appointment as Chair of the Boards is still in question, there also appears to be a serious conflict between your ability to order and approve the Enterprises’ proposals as FHFA Director and to ultimately influence the development of such proposals as Chair of the Enterprises’ boards,” they wrote.
Pulte’s directive restricts consideration to digital assets that are stored on U.S.-regulated, centralized exchanges and can be clearly evidenced. The directive requires that Fannie Mae and Freddie Mac establish adjustments to account for market volatility. Under Pulte’s directive, both Fannie Mae and Freddie Mac must submit their assessment proposals to the Boards of Directors for approval, and then to the FHFA for final review.
“To the extent that historical volatility and liquidity persists even as the market matures, a borrower using crypto faces an increased risk that they may not be able to exit a crypto position and convert to cash at a price that would allow them to buffer against risk of mortgage default,” continued the Senators in their letter. “Crypto is also subject to heightened risks of loss due to scams, cyber hacks, or physical theft, which could leave homeowners vulnerable to losing their crypto assets with little hope of recovery.”
Click here for more on the Senators letter to FHFA Director Pulte on the use of crypto by Fannie Mae and Freddie Mac.
The post Congressional Members Query FHFA Director Over Cryptocurrency Plan first appeared on The MortgagePoint.
