Senator Merkley, Colleagues Probe FHFA Director Pulte on Risky Proposals to Allow Unconverted Cryptocurrency Assets in Mortgage Loan Underwriting
“While you claim that you issued this order following ‘significant studying,’ the directive includes no information on the process through which the Enterprises will develop their proposals, FHFA’s assessment of potential risks and benefits, or how it will gather stakeholder feedback.”
Washington, D.C. – U.S. Senators Jeff Merkley (D-OR) and Elizabeth Warren (D-Mass.), Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee, Chris Van Hollen (D-MD), Mazie Hirono (D-HI), and Bernie Sanders (D-VT) sent a letter to William Pulte, the Director of the Federal Housing Finance Agency (FHFA), raising concerns about his recent order directing Fannie Mae and Freddie Mac (collectively, “the Enterprises”) to submit proposals that would allow mortgage lenders to account for unconverted cryptocurrency assets in the underwriting process, which could introduce unnecessary risks to consumers and pose serious safety and soundness concerns for the U.S. housing and financial markets.
“Under current policy, neither the Enterprises, nor any other channel for federally-backed, insured, or guaranteed mortgages, permit 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,” wrote the Senators. “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.”
They continued: “To the extent that historical volatility and liquidity persists even as the market matures, a borrower using crypto faces an increased risk that they may not be able to exit a crypto position and convert to cash at a price that would allow them to buffer against risk of mortgage default. Crypto is also subject to heightened risks of loss due to scams, cyber hacks, or physical theft, which could leave homeowners vulnerable to losing their crypto assets with little hope of recovery.”
The lawmakers also questioned the conflict of interests, including between the Trump Administration, the cryptocurrency industry, and the Enterprises’ Boards. “Your order states that ‘each Enterprise must submit and receive approval from its Board of Directors.’ However, you are the current Chair of each Board, and you have stacked the Boards with members who represent FHFA personnel and your industry allies. While the legality of your appointment as Chair of the Boards is still in question, there also appears to be a serious conflict between your ability to order and approve the Enterprises’ proposals as FHFA Director and to ultimately influence the development of such proposals as Chair of the Enterprises’ boards,” they wrote.
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