Quasi Gov. Agencies Fannie & Freddie to use Crypto as Mortgage Collateral
4-years ago Trump proposed use of Crypto as Collateral (general statement.) At the time the US regulatory bodies were not having any part of that. Recall, there was an all out blitzkrieg to snuff out Crypto in every corner of the USA. Amazing how cleaning house and properly defining regulations to stimulate growth can impact a year in crypto. It has been report by the Associated Press: The head of the federal government agency that oversees Fannie Mae and Freddie Mac wants the mortgage giants to consider accepting a homebuyer's cryptocurrency holdings in their criteria for buying mortgages from banks. WOW, if that doesn't make your head snapback from the speed of that 180 about face.
Who, What?
William Pulte, who is director of the Federal Housing Finance Agency (FHFA), which oversees Fannie and Freddie, ordered the agencies earlier this week to prepare for consideration crypto as an asset for reserves when they assess risks in single-family home loans. The policy change is meant to encourage banks to expand how they gauge borrowers' creditworthiness, in hopes that more aspiring homebuyers can qualify for a home loan. It also recognizes that cryptocurrencies have grown in popularity as an alternative to traditional investments, such as bonds and stocks.
What is not clear is...
What does this really mean? Crypto assets that "can be evidenced and stored on a U.S.-regulated centralized exchange subject to all applicable laws" are to be considered by the agencies in their proposal. How will this be audited? Will you have to exposure your keys for proper validation? Digital reports can be manipulated from both sides of that desk! How often will your crypto be subject to audit for a long-term long obligation? Will there be any required reporting upon the sale of such assets? What penalties will be assessed to those who fall under reserve requirements from the sale of their crypto assets?
I can see BTC working for collateral as its not designed for commerce, Altcoins well....
Will Stocks and Crypto be equal weighted as Collateral?
Stock investments are treated as qualifying assets that count toward reserves that banks want borrowers to demonstrate. Traditionally, volatile assets such as crypto are more volatile, were discounted by lenders from a score perspective. Will this system be updated? Will a table of values be provided from loan originators? I am very curious how this will work!
What else must change with this proposal?
IF Fannie and Freddie will accept cryptocurrency as collateral, that's a strong incentive for banks to shift their practices too. Digital assets are coming of age!!
Timeframe?
No timeframe was mentioned but I assume this could be an easy modification to modern computer systems. HA HA, just kidding they are prolly still using floppy disk based systems like the FAA. What is realistic is something in 2026 or 2027 if you can going to a mortgage provider outside Fannie and Freddie run systems. Even though this is an order for them to accept Crypto I still expect slower adoption by Fannie and Freddie.
Summary
This is a big win for advocates of cryptocurrencies who want crypto to be treated the same way as other assets. We are seeing crypto maturing at a very fast clip in 2025. Can't wait for the second half of the year to see what wonders we will encounter!
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