U.S. Senator Cynthia Lummis has introduced legislation aimed at incorporating digital assets into the mortgage application process, following recent changes proposed by a federal housing regulator.
Key Provisions of the Bill
The proposed legislation, named the '21st Century Mortgage Act', would cement a June directive from the Federal Housing Finance Agency (FHFA) asking Fannie Mae and Freddie Mac to consider cryptocurrency holdings in mortgage loan evaluations. Lummis stated, ‘This legislation embraces an innovative path to wealth-building, keeping in mind the growing number of young Americans who possess digital assets.’
Criticism and Concerns
The effort quickly drew pushback from several Senate Democrats, who expressed concerns in a letter to FHFA Director William Pulte. They urged the agency to more fully assess the risks, warning that crypto's volatility and liquidity issues could raise the odds of default for borrowers relying on it as collateral.
Comparison with Initiatives in Other Countries
Lummis’ bill would allow mortgage applicants to include digital assets as part of their financial profile without requiring them to convert holdings into cash first. Additionally, a similar bill, the 'American Homeowner Crypto Modernization Act', was introduced by Representative Nancy Mace, requiring lenders to account for a borrower's crypto assets when reviewing mortgage applications. Outside the U.S., crypto-backed mortgages are also gaining traction, with Australia-based Block Earner announcing plans for Bitcoin-backed home loans.
Senator Lummis's bill may change the approach to mortgage lending in the U.S., despite concerns about the potential risks associated with cryptocurrencies.
