The nation’s largest mortgage finance firms will begin accepting crypto as an asset on a mortgage application, another significant step by the Trump administration to bring digital currencies into mainstream finance.
This week, President Donald Trump’s housing
director, William Pulte, said he would direct Fannie Mae and Freddie Mac—the
nation’s big mortgage finance firms—to consider homebuyers’ crypto investments
as part of their overall wealth in assessing whether they afford a mortgage.
Traditionally, a homebuyer’s cash savings and stock investments are what mortgage
lenders consider.
Fannie and Freddie, which are a critical cog in the housing market, buy mortgages from
banks and established a set of criteria for which borrowers’ mortgages they
will accept.
The announcement by Pulte, director of the
Federal Housing Finance Agency, on Wednesday comes as an increasing number of
Americans have been using digital currencies to buy houses and new companies
have formed to help them take advantage of their crypto holdings to buy real
estate.
The crypto market and its many supporters
have been pushing regulators in this direction for several years, raising
concerns among consumer advocates that this lightly regulated and highly volatile investment asset is being tied to
something as vital to the economy as the housing market.
In a recent survey, roughly 14% of homebuyers
said they planned to sell crypto assets to help get the cash to cover a down
payment on a home, up from 5% in 2019, according to Redfin, the residential
real estate brokerage company.
Several startups are already pitching
crypto as a way to cut through the market’s current morass
and jump-start home sales. One firm, Milo, offers investors a way to use
bitcoin as collateral for getting a home
mortgage.
The interest tends to be a few percentage
points higher than a normal mortgage, but the customer gets the benefit of not
having to sell any crypto or pay capital gains. When the mortgage is paid off,
Milo returns the bitcoin to the investor.
Other firms are helping homeowners’ tap their home’s equity to buy crypto. The strategy
is similar to so-called home equity investment contracts, which provide lump-sum cash payments to a homeowner in return
for the right to share in the appreciation
in a home’s value.
(Matthew Goldstein)
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