Senate Democrats have initiated an investigation against the FHFA, questioning the directive to include crypto assets in mortgage assessments and highlighting risks associated with crypto volatility.
FHFA's Directive and Crypto
Senate Democrats have expressed concerns about the directive by FHFA Director William Pulte, which involves including crypto assets in mortgage risk assessments. This move is aimed at considering cryptocurrencies even if they are not converted to USD. The newly appointed director, involved in housing initiatives, faces criticism from senators like Jeff Merkley, who cite potential risks to stability.
Warnings About Financial Crises from Crypto
Senators, including Jeff Merkley, warn that incorporating crypto assets could lead to a repeat of past financial crises. Fannie Mae has labeled crypto collateral as 'least appealing', indicating internal doubts. A spokesperson for Fannie Mae stated, *'crypto and stablecoins were labeled as the least appealing application for mortgage collateral, indicating internal skepticism'*, highlighting concerns.
No Precedent for Unconverted Crypto in Mortgages
Historically, the FHFA has avoided using alternative asset collateral due to potential threats. No precedent exists for using unconverted crypto at this level in mortgage assessments. Jeff Merkley remarked, *'The 2008 crisis proved that lax financial practices around risky investments can blow up the housing market—and hardworking families in Oregon and across the country paid the price. Crypto poses serious risks to the stability of the housing market. This is a risk we must address.'*, indicating a strong stance on regulatory practices.
The examination of the FHFA's directive highlights the need for stringent regulatory oversight in the relationship between cryptocurrencies and mortgage financing amidst rising concerns over financial risks.
