Senate Democrats Demands For Clarity Regarding New Mortgage Proposal

A group of Senate Democrats is demanding answers from Federal Housing Finance Agency (FHFA) Director William Pulte over his directive to explore how cryptocurrency holdings might be factored into mortgage applications.

This discussion has raised sharp questions about the risks of cryptocurrencies, the possibility of a conflicts of interest, and the broader impact that this decision could have on the U.S. housing market.

In a letter led by Senator Jeff Merkley and co-signed by Elizabeth Warren, Chris Van Hollen, Mazie Hirono, and Bernie Sanders, the lawmakers demanded for Pulte to detail how the FHFA hopes to “fully assess the potential risks and benefits” of his proposal and its implications for the U.S housing market and financial system.

The letter follows Pulte’s recent order instructing mortage purchasers Fannie Mae and Freddie Mac to develop plans for incorporating crypto holdings into risk assessments for single-family mortgage loans, without converting the crypto assets into U.S. dollars.

The Inherent Risk Of Crypto On Homebuyers and the Financial System

The senators warn that including crypto in mortgage underwriting “could introduce unnecessary risks to consumers and pose serious safety and soundness concerns” for both the housing and financial markets.

Current federal policy does not allow mortgage lenders to consider crypto assets unless they’re liquidated to cash, reflecting longstanding concerns about market instability and consumer protection.

Lawmakers highlighted crypto’s history of extreme volatility and liquidity challenges, cautioning that borrowers relying on digital assets may be unprepared to absorb losses or meet their mortgage obligations in turbulent markets.

They also cited heightened risks of loss due to scams, hacks, and theft in the crypto space, increasing vulnerability for homeowners.

Safeguarding Against Unduly Influence Over The Proposal

The senators are also demanding for Fannie Mae, Freddie Mac, and the FHFA will prevent powerful people who have ties to crypto to skew the ultimate decision on this topic, including President Trump and his family.

They referenced reports showing President Donald Trump's close connection with the crypto sector—including his involvement in trading platforms, stablecoins, NFTs, and mining ventures.

The senator also included Pulte as one of the risks, citing his financial disclosure which revealed that his spouse held up to $2 million in crypto.

The lawmakers also noted that Pulte chairs the boards of both Fannie Mae and Freddie Mac and has the power to influence their composition, raising suspicions about board independence and governance.

Senators Call for Greater Transparency On Proposal

The letter criticizes Pulte’s order as vague, lacking clear guidelines on how Fannie Mae and Freddie Mac should approach the proposal, assess risks, solicit feedback, or implement appropriate safeguards.

The senators emphasized the need for transparency given the FHFA’s past shortcomings in overseeing crypto-related activities, referencing the 2023 banking crisis exacerbated by crypto-based business lines.

They have requested a detailed response by August 7, including disclosure of all communications related to the order, specifics on the approval process, and details on how Pulte will manage any potential conflicts of interest.