In a significant development for both the housing and digital asset markets, the Federal Housing Finance Agency (FHFA) has instructed mortgage giants Fannie Mae and Freddie Mac to develop policies for considering cryptocurrency holdings in home loan applications. This directive marks a pivotal step toward modernizing mortgage finance rules to reflect the growing prevalence of digital assets.
The order, issued by FHFA Director William J. Pulte, does not implement immediate changes. Instead, it requires the two government-sponsored enterprises to draft a formal proposal for review. The entire process—from drafting and approval to implementation—could span several months or longer.
Fannie Mae and Freddie Mac play a foundational role in the U.S. housing market, backing more than half of all mortgages. Their guidelines often set the standard for the broader mortgage industry, meaning any change could have wide-reaching effects.
How Cryptocurrency Could Be Used in Mortgage Applications
Under the proposed changes, cryptocurrency may be integrated into mortgage evaluations in two primary ways: as asset reserves or as a source of down payment funds. The FHFA’s current focus, however, is solely on the former.
Asset Reserves
Borrowers are often required to have cash reserves—extra funds beyond the down payment and closing costs—to qualify for a mortgage. This is especially common for applicants with lower credit scores or higher debt-to-income ratios.
If the new rules are adopted, certain cryptocurrencies may be counted toward these reserve requirements without the borrower having to sell them. This would allow applicants to avoid triggering capital gains taxes while still using their digital assets to strengthen their mortgage application.
For example, consider a homebuyer who needs to show six months of mortgage payments in reserves. They have $5,000 in cash but $50,000 in Bitcoin. Under current rules, they might be denied because their cash reserves are insufficient. Under the proposed system, their Bitcoin holdings could help them meet the requirement and secure loan approval.
Down Payments
The new directive does not change existing rules for down payments. Borrowers still cannot use cryptocurrency directly for a down payment on a conventional mortgage backed by Fannie Mae or Freddie Mac.
To use crypto for a down payment, applicants must first sell their digital assets, convert them to U.S. dollars, deposit the funds in a U.S. financial institution, and provide a clear paper trail documenting the transaction. Those wishing to use crypto directly for a down payment must work with a specialized crypto mortgage lender outside the conventional lending system.
Still, including crypto in reserve calculations could help some applicants qualify for better mortgage terms or interest rates by demonstrating financial stability and additional liquidity.
Expected Regulations and Safeguards
The FHFA has outlined several guardrails to ensure that any new rules are implemented safely:
- Eligible Cryptocurrencies: Not all digital assets will be accepted. Bitcoin, due to its dominance and relative stability, is likely to be included. Other cryptocurrencies may be considered only if they meet specific eligibility criteria set by the agencies.
- Limited Valuation: To account for market volatility, only a percentage of a cryptocurrency’s total value may be counted toward reserve requirements. This approach is similar to existing rules for retirement accounts, where often only 60% of the balance can be used as reserves.
- Regulated Exchanges Only: Cryptocurrency holdings must be held on a U.S.-regulated centralized exchange. This ensures compliance with federal laws and simplifies verification and auditing processes.
These measures are designed to mitigate risks associated with cryptocurrency’s price fluctuations and regulatory uncertainties.
Timeline for Implementation
It is important to emphasize that no rules have changed yet. The FHFA has only mandated that Fannie Mae and Freddie Mac develop a proposal “as soon as reasonably practical.”
After the proposal is drafted, it must be approved by each agency’s board of directors and then reviewed by the FHFA. Once approved, the enterprises must update their automated underwriting systems—tools used by lenders nationwide to process loan applications.
Given these steps, it may be many months before any changes take effect. Nonetheless, for prospective homebuyers with significant cryptocurrency investments, this initiative represents meaningful progress. In the future, they may be able to leverage their digital assets to achieve homeownership without incurring tax liabilities or sacrificing long-term investments.
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Frequently Asked Questions
Can I use Bitcoin to buy a house directly?
No, you cannot use cryptocurrency directly for a down payment or purchase through Fannie Mae or Freddie Mac. You must first convert crypto to U.S. dollars and place the funds in a bank account. Specialized lenders outside the traditional system may offer direct crypto down payment options.
How soon can I use crypto as reserves for a mortgage?
The rulemaking process is still in its early stages. It will likely take several months for proposals to be drafted, approved, and implemented. Borrowers should not expect changes in the immediate future.
Which cryptocurrencies will be accepted?
Bitcoin is expected to be eligible due to its market position. Other cryptocurrencies may qualify but will need to meet specific stability, liquidity, and regulatory compliance standards set by the agencies.
Why can’t I use all of my crypto holdings toward reserves?
Due to high volatility, lenders will likely only count a portion of your cryptocurrency’s value—similar to how retirement accounts are treated. This buffer protects both the borrower and the lender from sudden market downturns.
Do I still have to pay taxes on crypto used in a mortgage?
If your cryptocurrency is counted as reserves without being sold, you will not trigger a taxable event. However, if you sell crypto to fund a down payment, capital gains taxes may apply.
Will this change make getting a mortgage easier?
For borrowers with significant crypto assets but limited cash, these changes could improve loan eligibility. It may help applicants meet reserve requirements or secure better terms without liquidating digital holdings.