Senate Democrats Scrutinize FHFA’s Crypto Mortgage Directive

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A coalition of Senate Democrats has launched a pointed inquiry into a recent directive from Federal Housing Finance Agency (FHFA) Director William Pulte, demanding clarity on his push to integrate cryptocurrency holdings into mortgage risk assessments. In a sharply worded letter sent Friday, Senators Jeff Merkley, Elizabeth Warren, Chris Van Hollen, Mazie Hirono, and Bernie Sanders pressed Pulte for answers by August 7, citing serious risks to the U.S. housing market and financial stability.

The FHFA, which has overseen Fannie Mae and Freddie Mac since their 2008 federal conservatorship, currently requires crypto assets to be converted to U.S. dollars before factoring into mortgage applications. Pulte’s directive, however, suggests a pivot, instructing Fannie Mae and Freddie Mac to explore treating crypto holdings as direct assets in risk evaluations. The senators slammed this move as reckless, warning it could destabilize the housing market.

“Introducing crypto into mortgage assessments invites volatility and liquidity risks that could undermine borrowers’ ability to repay loans,” the senators wrote. They highlighted crypto’s wild price swings, noting that borrowers might struggle to liquidate holdings at favorable prices to cover mortgage defaults. The letter also flagged cybersecurity threats, scams, and thefts, which leave crypto investors exposed to irreparable losses.

The senators did not stop at market risks. They raised ethical red flags, questioning potential conflicts of interest tied to Pulte’s leadership and his wife’s reported crypto holdings, valued at up to $2 million per financial disclosure. The lawmakers also criticized Pulte’s dual role as FHFA Director and board chair of both Fannie Mae and Freddie Mac, accusing him of stacking the boards with industry-friendly allies. “This lack of impartiality undermines public trust,” they argued.

Further scrutiny fell on the directive’s opaque rollout. The senators noted it lacks a clear framework for how Fannie Mae and Freddie Mac would develop proposals or assess risks. They demanded internal communications, details on the approval process, and plans to mitigate conflicts of interest. The letter referenced the 2023 banking crisis, where crypto exposure fueled the collapse of three major banks, as a stark warning. It also cited a 2021 Fannie Mae report that dismissed crypto for deposits, payments, or collateral as “the least appealing” blockchain application.

The senators’ concerns extend to broader political ties, pointing to President Donald Trump’s family ventures in crypto trading platforms, stablecoins, mining, memecoins, and NFTs. They warned that such connections could amplify perceptions of bias in FHFA’s decision-making.

As the August 7 deadline looms, the senators’ letter signals a broader unease with injecting volatile crypto assets into the tightly regulated mortgage system. With housing affordability already strained, they argue, adding unpredictable variables like crypto could spell trouble for homeowners and the financial system alike.