FHFA Directs Fannie Mae Freddie Mac to Explore Crypto in Mortgages

The U.S. Federal Housing Finance Agency (FHFA) has directed Fannie Mae and Freddie Mac to explore the use of cryptocurrency in mortgage asset verification processes. This move has sparked concerns among industry insiders and analysts about the potential risks and regulatory challenges it poses.

According to industry sources, the directive could allow homebuyers to use digital assets as collateral in mortgage underwriting. This shift would alter how financial institutions assess risk, particularly for borrowers with substantial crypto holdings. While the crypto industry may welcome this policy direction, the volatility of the cryptocurrency market could directly impact the mortgage market, potentially leading to a new subprime mortgage crisis.

Analysts have drawn comparisons to pre-2008 subprime lending practices, where inflated asset values obscured borrower fragility. Allowing crypto to backstop loans could replicate those dynamics under a new name. In the absence of clear guidance, lenders may interpret asset verification discretion differently, creating uneven standards, particularly if crypto valuations fluctuate significantly during loan approval.

Market participants are preparing for potential policy shifts, with industry associations reportedly beginning internal discussions on how to measure digital asset volatility in loan stress tests and risk models. The idea of integrating crypto assets into mortgage underwriting underscores a broader shift in how alternative forms of wealth are being treated by legacy institutions. Financial regulators and lenders are under pressure to modernize risk models that were originally designed for traditional income and asset classes.

Volatile assets could cause sudden drops in collateral value, increasing the chance of borrower default if market corrections occur during the loan term. Lenders may need to develop systems to verify digital wallet balances through third-party attestations or integrate blockchain analytics tools into compliance checks. While some private fintech lenders offer crypto-backed loans, these operate outside of federally regulated mortgage systems like Fannie Mae and Freddie Mac.