The director of the FHFA, the US federal agency responsible for supervising and regulating the main real estate financing institutions in the United States, has asked the two leading companies in the US mortgage system to recognize cryptocurrencies. This is a step that will allow “Bitcoin to enter the American dream,” according to Michael Saylor.
Cryptocurrencies soon to be accepted as collateral for mortgages
This is a small revolution in the highly regulated world of US mortgage lending. On Wednesday, the Federal Housing Finance Agency (FHFA) officially asked Fannie Mae and Freddie Mac, the two pillars of the mortgage system, to include cryptocurrencies in their risk assessment criteria for residential mortgages.
The directive, signed by William J. Pulte, director of the FHFA, orders the two public companies to submit a detailed plan on how to integrate digital assets into their analysis models, without requiring borrowers to convert their cryptocurrencies into dollars before a loan is granted.
For the first time, crypto assets held on regulated centralized platforms in the United States will be eligible as collateral for a traditional mortgage loan. Michael Saylor, CEO of Strategy, reacted to the news without mincing words:
However, the FHFA directive specifies that only assets “that can be verified and held on a regulated centralized platform in the United States” will be eligible. In other words, on-chain assets held via self-custody or on DeFi protocols will not be counted at this stage.
As for which cryptos could be taken into account, this is not clarified in the document. We also do not know what ratio will be established to obtain a loan, given the inherent volatility of cryptos.
This change could have a significant impact, as Fannie Mae and Freddie Mac together guarantee more than half of the country’s mortgages, or nearly $6 trillion. By allowing them to include cryptocurrencies in their risk assessment, the FHFA is sending a signal to banks, as pointed out by Danielle Hale, an economist at Realtor.com, one of the leading real estate websites in the United States:
If Fannie and Freddie accept cryptocurrencies as collateral, this is a strong incentive for banks to change their practices. People who would otherwise have had to sell their cryptocurrencies to be eligible, which could have been a sticking point for them, will now be able to apply for a loan. This effectively expands the pool of eligible buyers.
On X, the director of the FHFA justified this decision as another step toward President Trump’s goal of making the United States “the crypto capital of the world.” This is a clear policy direction, in a context where favorable signals towards digital assets are multiplying in Washington, from the adoption of regulated stablecoins via the GENIUS Act to the authorization of new ETFs.
History repeating itself?
It should be remembered that in the 2000s, Fannie Mae and Freddie Mac accumulated a growing share of risky mortgages, including a large proportion of subprime loans, often granted to households with poor credit ratings. By buying these loans from banks and securitizing them as mortgage-backed securities (MBS), they fueled the housing bubble and encouraged the banking sector to lend more without rigorous controls.
This accumulation of toxic assets, coupled with the implicit government guarantee on these two entities, allowed risks to spread throughout the global financial system. When the market turned in 2007-2008, losses on these portfolios exploded, leading the US government to place them under conservatorship in September 2008, at an estimated cost to taxpayers of around $190 billion.
No doubt some will be quick to draw parallels between today’s announcement and that event. Bis repetita?
