FHFA Explores Bitcoin as Mortgage Collateral Amid Crypto Regulatory Shift

The US Federal Housing Finance Agency (FHFA) is exploring the potential of digital assets like Bitcoin as collateral for mortgage applications. This initiative was announced by FHFA Director Bill Pulte on July 24, who stated that the agency is beginning a review process to determine how cryptocurrencies might be used in home loan evaluations. The FHFA regulates America’s housing finance system, overseeing major institutions such as Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.

Traditionally, mortgage underwriters have accepted collateral that includes the applicant’s savings, retirement accounts, and publicly traded securities. However, cryptocurrencies have been excluded due to market volatility and a lack of regulatory clarity. This development could significantly change the underwriters’ reluctance, as the emerging industry could be recognized as a viable financial instrument for house financing.

The planned review comes amid a broader wave of regulatory openness toward crypto in the US, especially under the previous administration. While the FHFA has yet to reveal how the crypto mortgage processes would be evaluated, a firm has developed a Bitcoin credit framework that assesses risk using BTC’s price, volatility, loan term, and projected returns. This model is designed to help institutions evaluate borrower strength when digital assets are involved.

Industry players have welcomed the move, noting that many digital asset holders face hurdles when applying for mortgages. Tristan Yver, the co-founder of a crypto exchange, pointed out that crypto holders often need to convert their holdings into fiat and allow the funds to sit in a traditional bank account—sometimes for months—before lenders acknowledge them. This process delays financing and has forced many long-term holders to exit their crypto positions prematurely.

Anthony Apollo, who leads a stable token commission, reflected on these practices from major financial institutions. He shared that some institutions, for example, required digital assets to be converted and seasoned in a bank account for several months before being considered in mortgage evaluations. This initiative by the FHFA could potentially streamline the process, making it easier for crypto holders to use their digital assets as collateral for mortgages.