FHFA Orders Fannie Mae Freddie Mac to Consider Cryptocurrencies for Mortgages

In a significant development for the cryptocurrency and mortgage industries, the Federal Housing Finance Agency (FHFA) has directed Fannie Mae and Freddie Mac to explore the inclusion of cryptocurrencies as eligible assets for mortgage applications. This directive is part of a broader initiative by the Trump administration to integrate cryptocurrencies into the federal financial system. According to the directive, only cryptocurrencies listed on U.S.-regulated exchanges can be used for the "two-box" mortgage reserve, ensuring that these assets are subject to federal know-your-customer and anti-money laundering rules.

This move represents a substantial shift in how Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs) that provide liquidity support to the mortgage market, evaluate borrowers' assets. Previously, cryptocurrencies had to be converted to U.S. dollars before they could be included in mortgage risk assessments. The new policy aims to streamline this process by allowing cryptocurrencies to be considered directly, provided they meet the regulatory requirements. This change is expected to benefit borrowers who hold significant amounts of cryptocurrencies, as it provides them with an additional option for leveraging their assets in mortgage applications.

The FHFA's order comes as part of a broader push by the Trump administration to position the United States as a leader in the cryptocurrency space. In March, President Trump announced the establishment of a strategic bitcoin reserve, treating bitcoin as a reserve asset for the federal government. This move, along with the inclusion of Coinbase, the world's largest bitcoin custodian, in the S&P 500 index in May, underscores the administration's commitment to integrating cryptocurrencies into the financial system.

The order directs Fannie Mae and Freddie Mac to prepare proposals that would consider cryptocurrencies as a standalone asset when determining creditworthiness. However, the specific cryptocurrencies that would be permitted for consideration are not yet clear. Bitcoin, the most popular crypto asset, is likely to be included if the GSEs move forward with the plan. The order also specifies that prior to implementing any changes, Fannie and Freddie must first receive approval from their respective boards before submitting the proposed crypto policies to the FHFA for review.

The FHFA's directive is a significant step towards recognizing the growing importance of cryptocurrencies in the financial landscape. By allowing borrowers to use cryptocurrencies as part of their mortgage applications without converting them to cash, the FHFA is paving the way for greater integration of digital assets into the traditional financial system. However, the volatility of cryptocurrencies remains a concern, and lenders will need to appropriately discount these assets based on their volatility to ensure the stability of the mortgage market.