Five Democratic U.S. senators are questioning the head of the country’s housing finance agency over a new plan to factor in crypto when approving certain mortgage loans.
Led by Senator Jeff Merkley, the group sent a letter on Friday to Federal Housing Finance Agency (FHFA) Director William Pulte, asking him to clarify how he plans to “fully assess the potential risks and benefits” of the move and its possible impact on the U.S. housing market and broader financial system.
The letter was also signed by Senators Elizabeth Warren, Chris Van Hollen, Mazie Hirono, and Bernie Sanders. They requested a formal response from Pulte by August 7.
The inquiry follows Pulte’s recent directive to Fannie Mae and Freddie Mac, two major government-backed mortgage buyers, to explore how they might consider crypto assets in risk evaluations for single-family home loans, without requiring the crypto to be converted to U.S. dollars.
The FHFA has managed Fannie Mae and Freddie Mac since 2008, when both entities were placed under federal control in response to the subprime mortgage crisis.
Lawmakers warn of crypto risks in mortgage approvals
The senators expressed concern that Director Pulte’s proposal “could introduce unnecessary risks to consumers and raise serious safety and soundness issues for the U.S. housing and financial systems.”
They pointed out that, under current rules, Fannie Mae, Freddie Mac, and other issuers of federally backed mortgages do not allow crypto assets to be considered in mortgage evaluations unless those assets are first converted into U.S. dollars.
The lawmakers also highlighted the historically high volatility and liquidity problems in the crypto market. They warned that borrowers relying on crypto may struggle to quickly convert their holdings into cash, increasing the chance they could default on their mortgage during a downturn.
Democrats raise conflict of interest concerns over crypto Home Loans
The group of Democratic senators voiced alarm that the FHFA’s new crypto-related directive may involve serious conflicts of interest. They questioned how the agency, along with Fannie Mae and Freddie Mac, would prevent influence from individuals with ties to the crypto industry, specifically pointing to the U.S. President Donald Trump and his family, who are reportedly involved in crypto ventures, including a trading platform, a stablecoin, a mining business, memecoins, and NFTs.
They also scrutinized FHFA Director William Pulte, noting that public financial records show his spouse holds up to $2 million in cryptocurrency, something they say raises “additional concerns” about potential personal conflicts.
The senators argued the situation is made worse by the fact that Pulte serves as chair of the boards of both Fannie Mae and Freddie Mac, and is requiring both to get board approval before making any crypto-related changes. They accused him of stacking those boards with “industry allies,” creating what they called “a serious conflict.”
Call for more transparency and oversight
The letter also criticized Pulte’s directive for lacking key details, such as how the proposals will be developed, how risks will be assessed, or how public feedback will be collected. They said this lack of clarity is especially troubling given the FHFA’s “previous failures” in monitoring crypto activity.
They referenced the 2023 banking crisis, when three U.S. banks collapsed, partly due to exposure to crypto-related risks. They also cited a 2021 finding from Fannie Mae, which concluded that using crypto or stablecoins for deposits, payments, or collateral was the “least attractive” blockchain use in housing finance.
The senators requested Pulte respond to several questions, including details on communications about crypto, the decision-making process behind the order, and how he plans to handle any potential conflicts of interest.