Five U.S. Senate Democrats are scrutinizing the head of the nation’s housing finance agency over his proposal to factor cryptocurrency into the mortgage approval process.
Led by Senator Jeff Merkley, the group sent a letter on Friday to Federal Housing Finance Agency (FHFA) Director William Pulte, requesting details on his directive to evaluate the potential risks and benefits of incorporating crypto assets into mortgage assessments. The lawmakers expressed concern over the move’s possible impact on the housing market and the broader financial system.
The letter, co-signed by Senators Elizabeth Warren, Chris Van Hollen, Mazie Hirono, and Bernie Sanders, asks Pulte to respond by August 7.
In June, Pulte instructed mortgage finance giants Fannie Mae and Freddie Mac to draft proposals on how to consider cryptocurrency holdings—without requiring conversion to U.S. dollars—when assessing risk for single-family mortgage loans.
Since the 2008 financial crisis, which stemmed from the collapse of the subprime mortgage market, the FHFA has been the federal overseer of Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corporation).
Concerns Mount Over Cryptocurrency Risks in Homebuyer Market
The senators warned that Pulte’s proposal “could introduce unnecessary risks to consumers and raise serious safety and soundness concerns for the U.S. housing and financial markets.”
They pointed out that, under current policy, Fannie Mae, Freddie Mac, and other issuers of federally backed mortgages do not allow lenders to factor in cryptocurrency holdings unless those assets are first converted to U.S. dollars.
Highlighting crypto’s history of extreme volatility and liquidity challenges, the senators expressed concern that borrowers relying on digital assets may face “an increased risk” of being unable to convert their holdings into cash when needed—potentially leaving them vulnerable to mortgage default.
“Crypto is also subject to heightened risks of loss due to scams, cyber hacks, or physical theft, which could leave homeowners vulnerable to losing their crypto assets with little hope of recovery,” the senators said.
Democrats Warn Crypto Mortgage Order May Pose Conflict of Interest
The senators also raised concerns about potential conflicts of interest related to the FHFA’s directive, questioning how the agency, along with Fannie Mae and Freddie Mac, would guard against undue influence from individuals with ties to the crypto industry—including former President Donald Trump and his family.
They pointed out that the Trumps are heavily involved in various aspects of the crypto sector, including a trading platform with its own token, a stablecoin project, a crypto mining operation, and several memecoins and non-fungible tokens (NFTs).
The lawmakers also scrutinized FHFA Director William Pulte’s personal connections to the industry, noting that financial disclosures show his spouse holds up to $2 million in cryptocurrency. This, they said, “raises additional concerns about your potential conflicts.”
They further criticized Pulte for a “serious conflict” in the structure of his directive, which requires Fannie Mae and Freddie Mac to obtain board approval before implementing any changes—while Pulte himself chairs both boards. The senators accused him of filling those boards with “industry allies,” potentially compromising their independence.
Senators Demand Greater Clarity on Crypto Mortgage Directive
The senators criticized Pulte’s order as overly vague, stating it lacked key details on how Fannie Mae and Freddie Mac would craft their proposals, how the FHFA has assessed the potential risks and benefits, and what mechanisms would be used to gather public or expert feedback.
“Clarity on this order is especially critical given FHFA’s previous failures to adequately oversee crypto-related activity,” they wrote, pointing to the 2023 banking crisis in which three banks collapsed “in part due to run risks posed by growing lines of cryptocurrency-based business.”
They also referenced a 2021 analysis by Fannie Mae, which concluded that using crypto or stablecoins for deposits, payments, or collateral was the “least appealing application” of blockchain technology in the housing finance sector.
In their letter, the senators requested Pulte address a series of questions, including disclosing communications related to cryptocurrency, explaining the approval process behind the order, and outlining how he plans to address or recuse himself from any potential conflicts of interest.
