The largest mortgage financing company in the United States will begin accepting cryptocurrency as an asset in mortgage applications, marking another major step by the Trump administration to integrate digital currency into the mainstream financial system.
This week, William Pulte, the Trump administration’s housing affairs director, stated that he will instruct the two major U.S. mortgage financing companies—Fannie Mae and Freddie Mac—to consider borrowers’ cryptocurrency investments as part of their overall wealth when assessing their ability to afford a mortgage. Traditionally, mortgage lenders have focused on borrowers’ cash savings and stock investments.
As key components of the housing market, Fannie Mae and Freddie Mac purchase mortgages from banks and set a series of standards to determine which borrowers’ mortgages to accept.
Mr. Pulte, the director of the Federal Housing Finance Agency (FHFA), announced this news on Wednesday as an increasing number of Americans have been using digital currencies to purchase homes, and newly established companies are helping them use their held cryptocurrencies to buy real estate.
For years, the cryptocurrency market and its many supporters have been pushing regulators in this direction, raising concerns among consumer advocates who argue that this loosely regulated and highly volatile investment asset is being tied to the housing market, a sector critical to the economy.
Meanwhile, Mr. Trump has transformed from a critic of cryptocurrency to a strong supporter.
“In a world where regulatory enforcement has effectively been put on hold, boundaries are being rapidly pushed,” said Tyler Gellasch, a former SEC lawyer who now runs the financial industry trade group Healthy Markets Association.
However, the demand from homebuyers and cryptocurrency enthusiasts is growing. According to a recent survey by residential real estate brokerage firm Redfin, approximately 14% of homebuyers indicated they plan to sell cryptocurrency assets to raise cash for a down payment, up from 5% in 2019.
In 2017, David Doss sold part of his cryptocurrency holdings to raise cash for a down payment on a home in New Jersey. He said he would have preferred a way to retain his cryptocurrency while obtaining equivalent cash, but such an option was not available when he purchased the home.
“The intersection of cryptocurrency and real estate is developing quite rapidly,” said Mr. Doss, who provides cryptocurrency investment advice to wealthy investors. “This is the meeting of the oldest asset class and the newest asset class.”
Mr. Pult’s directive could have allowed Mr. Doss to retain part of his cryptocurrency assets. The directive states that homebuyers no longer need to sell their cryptocurrency to obtain cash during the mortgage qualification process.
As home sales stall, the influence of cryptocurrency in the housing market is growing. The sales slowdown has left many unable to sell or purchase homes, or to leverage their home equity through loans.
Some startups are already promoting cryptocurrency as a way to break through the current market impasse and revive home sales.
One such company, Milo, founded by former Morgan Stanley financial advisor Josip Rupena, offers investors a way to obtain a home loan using Bitcoin as collateral.
For a $1 million home, investors must deposit $1 million worth of Bitcoin, which Milo places in a secure account. The company then provides $1 million in cash to purchase the home.
Milo then issues an equivalent mortgage loan, which the homebuyer is responsible for repaying. Interest rates are typically several percentage points higher than those of conventional mortgages, but the benefit for customers is that they do not need to sell any cryptocurrency or pay capital gains tax. Once the mortgage is repaid, Milo returns the Bitcoin to the investor.
Mr. Rupena stated that he has underwritten $65 million in such mortgages and welcomes the Federal Housing Finance Agency’s shift in cryptocurrency policy.
Unlike most bank mortgages (such as those purchased by Fannie Mae and Freddie Mac), Mr. Rupena’s company does not require homeowners to make a down payment. His company provides financing for 100% of the transaction, which most banks do not do, and the Federal Housing Finance Agency’s new regulations on cryptocurrency are unlikely to change this.
“This is the first step toward giving cryptocurrency the same status as other assets,” Mr. Rupena commented on the Federal Housing Finance Agency’s decision.
Other companies are helping homeowners use their home equity to purchase cryptocurrency. Their strategy is similar to so-called home equity investment contracts, which provide homeowners with a one-time cash payment in exchange for the right to share in the appreciation of their home’s value.
However, unlike homeowners using the cash from such transactions to pay for home renovations or their children’s college tuition, they use it for one thing only: Bitcoin.
A startup named Horizon stated in a post on the X platform: “Turn your home into a Bitcoin earning engine.”
The typical process works as follows: Some companies issue loans to homeowners based on the value of their home equity, which are used to purchase Bitcoin. These companies typically profit by sharing in the appreciation of the home’s value when the homeowner sells the property.
Such transactions are appealing because homeowners do not need to make monthly payments like traditional home equity loans during the agreement period.
As security, some companies also place a lien on the property during the contract term (some contracts may last up to ten years).
Horizon launched its service at the Bitcoin Conference in Las Vegas last month, where Trump’s two sons were keynote speakers.
Consumer advocates see cause for concern.
“My overall impression is that setting any lien on your home to purchase cryptocurrency is a bad idea,” said Andrew Pizor, a senior attorney at the National Consumer Law Center, which specializes in mortgage financing. “This is your home, your shelter, and you must proceed with caution.”
All these projects are in their early stages, so it’s too soon to judge how much influence they will ultimately have.
Representatives from the relevant companies stated that concerns about consumers being taken advantage of are exaggerated. Most potential clients are wealthy investors. These companies also stated that they intend to comply with existing federal and state laws.
Harry W. Prahl, a 35-year-old who has been investing in Bitcoin since 2016, expressed interest in using the equity from his primary residence and several apartment buildings he owns to purchase more of the cryptocurrency.
Mr. Prahl has been in discussions with a company called Sovana, founded by a former Google executive, to use part of his real estate assets as collateral to purchase more Bitcoin. Sovana purchases Bitcoin based on the net worth of an individual’s property using a specific formula, then stores the cryptocurrency in a secure account. At the end of the transaction, the individual and the company share the profits.
If Bitcoin depreciates, the property owner must make up the difference.
“This is an alternative way to utilize commercial net worth without affecting business operations,” Mr. Prahl said, “and the fact that no payments are required is a true killer feature.”
Although the details of the Federal Housing Finance Agency’s policy shift remain unclear, on the surface, this marks a change in the Trump administration’s approach to regulating Fannie Mae and Freddie Mac. Under previous administrations, these two companies had been risk-averse following their near-collapse during the financial crisis due to millions of homeowners defaulting on their mortgages.
Mr. Pural stated in a post on the X platform regarding the new policy that he made the decision to allow Fannie Mae and Freddie Mac to include cryptocurrency as part of a homebuyer’s assets after “extensive research.”
He added that this was “in response to President Trump’s vision of making the United States the world’s cryptocurrency hub.”
