Exploring Cryptocurrency in Mortgage Qualification
The United States Federal Housing Finance Agency (FHFA) is set to investigate the potential inclusion of cryptocurrency holdings in mortgage qualification assessments.
FHFA’s Initiative
In a recent announcement on X, FHFA Director William Pulte, appointed by former President Donald Trump, indicated the agency’s interest in examining cryptocurrencies. “We will study the usage [of] cryptocurrency holdings as it relates to qualifying for mortgages,” he stated.
The FHFA is responsible for setting guidelines for US government-sponsored enterprises, including the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Should the agency permit the inclusion of Bitcoin (BTC), stablecoins, or other tokens as eligible assets, it could significantly integrate this asset class into traditional finance.
Changes in Regulatory Landscape
Until January 23, most major banks were restricted from offering crypto-backed loans or mortgages. This was due to the US Securities and Exchange Commission’s (SEC) accounting guidance SAB 121, which compelled listed companies to disclose crypto assets held on behalf of clients as liabilities on their balance sheets. This created complications for banks, as capital requirements are tied to balance sheet contents. However, on January 23, the SEC officially rescinded this guidance, paving the way for new crypto financial integrations.
Crypto-backed Mortgages
Although crypto-backed mortgages are already available, they are typically niche products offered by specialized companies. These firms allow customers to borrow fiat currency to purchase real estate or for other purposes, using digital assets as collateral, often with stringent collateralization requirements.
In these arrangements, if the value of the digital assets used as collateral decreases, customers are often required to provide additional assets to avoid liquidation. With the new FHFA guidance, traditional banks might soon offer such products, or entirely new types of crypto-backed lending options could emerge.
Crypto as a Path to Real Estate Ownership
A report released in late November 2024 highlighted a trend of lower-income households utilizing gains from cryptocurrency investments to pay off mortgages. Researchers noted, “the increase in borrowing is especially striking among low-income households in high crypto exposure areas.”
Mauricio Di Bartolomeo, co-founder of Bitcoin-backed loan company Ledn, mentioned to Cointelegraph that certain Bitcoin holders use crypto-backed loans to acquire real estate without selling any Bitcoin. These clients are generally high-net-worth individuals who do not fit the traditional criteria for real estate financing.
Image Credit: cointelegraph.com
