Five Senate Democrats have raised concerns with the Director of the Federal Housing Finance Agency (FHFA) regarding the risks associated with a proposal to include cryptocurrency in mortgage applications.
Senators' Concerns
Senators including Jeff Merkley and Elizabeth Warren expressed worry that Director William Pulte’s proposal could introduce unnecessary risks to consumers and threaten the stability of the U.S. housing and financial markets.
Content of the Letter
The senators requested detailed explanations of FHFA's risk assessment process and the potential implications for housing market stability. They highlighted the volatility of cryptocurrency prices, default risks, potential for scams, and limited traceability as factors that could increase mortgage default rates and systemic risks.
The senators stated, "Under current policy, neither the Enterprises nor any other channel for federally backed, insured, or guaranteed mortgages permits mortgage lenders to consider cryptocurrency when determining whether they can afford a mortgage, unless that cryptocurrency has been converted to U.S. dollars and is accompanied by appropriate documentation…. Expanding underwriting criteria to include the consideration of unconverted cryptocurrency assets could pose risks to the stability of the housing market and the financial system."
Support for the Proposal
Despite the criticism from Democrats, several Republicans and crypto industry experts have supported the proposal. The Democrats are calling for more clarity, stating that a lack of a comprehensive risk analysis could lead to another financial crisis similar to that of 2008.
The senators' request for clarification regarding the inclusion of cryptocurrency in mortgage lending reflects growing concerns about financial risks and housing stability.
