US Senate Democrats demand answers on FHFA plan to use crypto in mortgages without converting to US dollars.
Lawmakers warn that crypto’s volatility and security risks could hurt borrowers and weaken housing markets.
Senators raise conflict concerns as the FHFA director’s spouse holds crypto and boards may include industry allies.
Senate Democrats have raised concerns over a directive by the Federal Housing Finance Agency (FHFA). The move involves exploring the use of cryptocurrency in mortgage risk assessments. The senators are demanding clarity from FHFA Director William Pulte. Their concerns focus on potential risks to the housing market and overall financial system.
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Pulte recently ordered Fannie Mae and Freddie Mac to consider how crypto assets can be factored into mortgage approvals. This would allow borrowers to use crypto without converting it to U.S. dollars. The order represents a shift from current rules. Currently, crypto must be converted to fiat currency before it can be considered in federally backed loans.
Volatility and Liquidity Raise Concerns
The senators argue that crypto’s price swings and liquidity issues could harm borrowers and lenders. Crypto markets have seen sharp crashes and limited access to funds. Borrowers might struggle to convert crypto into cash when needed. This raises the chance of mortgage default during market downturns.
They also cited additional risks including cyber thefts, scams, and hacking incidents that could wipe out holdings. The senators said these risks could leave borrowers with no safety net. They warned that crypto volatility does not match the stable environment required for home financing.
Conflicts of Interest Under Scrutiny
The probe also touches on potential conflicts of interest within the FHFA. Pulte's spouse reportedly holds up to $2 million in cryptocurrency. This has raised questions about impartiality. The senators also pointed to Pulte's dual role as FHFA director and chair of both Fannie Mae and Freddie Mac boards. This allows him to oversee decisions that his own order mandates.
In addition, the senators alleged that the boards are stacked with members who support the crypto industry. They highlighted ties between the Trump family and various crypto projects. These include platforms, stablecoins, mining ventures, and digital tokens. They expressed concern that these connections may influence policy direction.
Regulatory Oversight and Historical Context
The legislators stressed the importance of strict regulation. They referred to the collapse of three banks associated with crypto exposures in 2023. These events underlined the potential dangers of integrating crypto into core financial systems. The senators said that FHFA’s past failures in supervising crypto activity also add to their doubts.
They referred to a 2021 Fannie Mae report. The report found crypto’s use for collateral or payments the least practical among blockchain applications. The senators now seek detailed answers on the FHFA’s assessment process. They requested information on the agency’s communication, review steps, and conflict-of-interest protocols.
