Two client groups are urging Federal Housing Finance Agency Director William J. Pulte to abandon his directive that Fannie Mae and Freddie Mac discover counting cryptocurrency holdings as reserves in single-family mortgage underwriting.
In a letter despatched Thursday, the Consumer Federation of America and the National Consumer Law Center mentioned the transfer, which was introduced on social media slightly than via the usual regulatory course of, would expose the 2 government-sponsored enterprises and taxpayers to extra dangers and invite unsound lending.
“Underwriting requirements on the GSEs should at all times account for debtors’ capability to repay and assist the broader security and soundness of the housing finance system,” the buyer groups wrote, including that cryptocurrencies “are notoriously unstable and provide no significant indication of a borrower’s long-term monetary stability or capability to pay their mortgage.”
“This proposal will expose taxpayers to elevated threat of losses, open the door to new types of predatory and unsafe lending focused at weak debtors and in the end threaten the security and soundness of the Enterprises and the broader monetary system,” the groups added.
Government-sponsored enterprises like Fannie Mae and Freddie Mac are backed by taxpayers, In 2008 the federal government bailed them out to stop a housing market collapse.
The client groups argued that even stablecoins — belongings marketed as regular shops of worth, typically pegged to fiat currencies — have seen volatility.
The letter additionally raised issues about broader focus dangers, the crypto business missing regulatory oversight and the crypto market’s historic susceptibility to fraud and hacking.
The client groups cited the collapse of FTX, a cryptocurrency trade, in addition to a North Korean hacking operation in February, the biggest cryptocurrency heist in historical past. In that incident, $1.5 billion in Ethereum tokens was stolen from Dubai-based cryptocurrency trade ByBit.
The letter’s signatories additionally mentioned that embedding crypto in federally backed underwriting requirements might give shoppers the impression crypto belongings are as secure and reliable as conventional reserves, distorting the broader mortgage market within the course of.
“The 2008 disaster … was pushed by the widespread underwriting of predatory, unaffordable mortgages, together with within the subprime market,” the buyer groups wrote. “Many of the loans that triggered the Great Recession have been made with out a cheap expectation that debtors might meet their mortgage obligations; equally, a system constructed on crypto-related belongings threatens to develop the market primarily based on what could end up to be a home of playing cards.”
Pulte pushes Fannie, Freddie to rely crypto belongings
The regulator and conservator of two influential mortgage patrons with authorities ties has directed them to take a look at digital foreign money’s use in qualifying debtors.
If area of interest debtors want to qualify for mortgages primarily based on the cryptocurrency belongings they personal, the groups argue, they need to flip to non-public non-qualified mortgage lenders that bear their very own threat, leaving taxpayers unexposed.
“If crypto buyers are looking for tailor-made mortgage merchandise,” they wrote, “that threat ought to stay within the non-public market — not in taxpayer-backed establishments.”
Democratic senators just lately raised questions on Pulte’s proposal, saying in a letter that the change being contemplated might introduce volatility and crime into the housing finance system. They additionally raised issues about potential conflicts of curiosity, given Pulte’s function as board chair of each GSEs, his partner’s crypto holdings and the shut relationship between President Donald Trump’s household and the digital asset business.
