Five U.S. Senate Democrats have begun an enquiry into the head of the nation’s housing finance authority regarding his proposal to factor cryptocurrency into the mortgage approval process. The investigation, spearheaded by Senator Jeff Merkley, involves posing questions to the director of the Federal Housing Finance Agency (FHFA), William Pulte.
A formal request has been sent to Pulte, asking for a detailed explanation of his plan and its potential impact on the U.S. housing market and financial system. The request, co-signed by Senators Elizabeth Warren, Chris Van Hollen, Mazie Hirono and Bernie Sanders, asks for a response by August 7.
Pulte previously instructed mortgage purchasers Fannie Mae and Freddie Mac to develop a proposal on incorporating cryptocurrency holdings in risk assessments for single-family mortgage loans, without converting the assets into U.S. dollars. The FHFA has been supervising both organizations since 2008, following the financial crisis sparked by the subprime mortgage market collapse.
The senators have expressed concerns that this plan could expose consumers to unnecessary risks and potentially destabilize the U.S. housing and financial markets. They highlighted that under the current policy, lenders cannot factor in cryptocurrency in mortgage decisions unless it is converted to U.S. dollars.
Furthermore, they pointed out the inherent volatility and liquidity issues of cryptocurrency, suggesting that borrowers who rely on cryptocurrency may face an elevated risk of mortgage default due to potential difficulties in converting crypto assets to cash. They also highlighted the increased risk of loss due to scams, cyber-attacks, or physical theft.
The senators have also expressed worries about potential conflicts of interest within the FHFA, Fannie Mae and Freddie Mac, especially considering President Donald Trump and his family’s deep involvement in the cryptocurrency industry.
The senators pointed out Pulte’s spouse’s significant crypto holdings, raising further conflict of interest concerns. They criticized Pulte’s order for lacking clarity and providing no details on how the proposal would be developed, how risks and benefits would be assessed, and how feedback would be gathered.
The senators have asked Pulte to answer a series of questions about the order, including its approval process and his steps to avoid conflicts of interest.
