Senate Democrats press FHFA on crypto use in mortgages

Five Senate Democrats are raising concerns about the potential risks of using unconverted cryptocurrency assets in mortgage underwriting, urging the Federal Housing Finance Agency (FHFA) to tread carefully.

In a letter addressed to FHFA Director Bill Pulte, the senators reacted to his social media post from late June, in which Pulte said the agency is studying the matter.

He then directed Fannie Mae and Freddie Mac to “consider only cryptocurrency assets that can be evidenced and stored on a U.S.-regulated centralized exchange subject to all applicable laws.” Cryptocurrencies under consideration would not need to be converted to U.S. dollars, Pulte said.

The signatories on this week’s letter include include Sens. Jeff Merkley (D-Ore.), Elizabeth Warren (D-Mass.), Chris Van Hollen (D-Md.), Mazie Hirono (D-Hawaii) and Bernie Sanders (I-Vt.).

“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,” the lawmakers wrote.

Proponents of crypto-backed mortgages argue that digital assets could expand access to credit for borrowers who struggle to qualify based on traditional income or credit metrics. But critics warn of the risks tied to the volatility of crypto assets, especially in scenarios where rapid price declines trigger margin calls — forcing borrowers to post additional collateral.

“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,” the senators wrote.

They also emphasized the security concerns. Crypto is subject to 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,” the lawmakers added.

Companies that currently offer crypto-backed mortgages include Miami-based Milo and Toronto-based lending platform Ledn. There is also Figure, led by former SoFi CEO Mike Cagney, and Moon Mortgage.

The senators also raised ethical and governance concerns, pointing to a potential conflict of interest between Pulte’s role as FHFA director and his position as chair of the boards of Fannie and Freddie.

“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,” the letter stated.