Breaking: $8 Trillion U.S. FHFA Recognises Bitcoin For Mortgages

The U.S. Federal Housing Finance Agency (FHFA) has directed Fannie Mae and Freddie Mac to recognize cryptocurrencies, including Bitcoin, as an asset for mortgage assessments. This decision, signed on June 25, has the potential to reshape how crypto assets are viewed in the U.S. housing finance system.

Bitcoin Recognised as an Asset for Mortgage

FHFA Director William Pulte has announced that Fannie Mae and Freddie Mac are now required to prepare a proposal for integrating cryptocurrency as a potential asset for mortgage loan risk assessments.

According to the directive, cryptocurrency held on U.S.-regulated centralized exchanges can be considered when calculating a borrower’s reserves, without needing to convert it into U.S. dollars.

Previously, cryptocurrencies had not been included in mortgage risk assessments. By adding Bitcoin and other crypto assets to the list, FHFA hopes to broaden the scope of assets that are considered when evaluating a borrower’s ability to secure a mortgage. “This will allow for a more complete assessment of borrower reserves and contribute to sustainable homeownership,” Pulte stated.

Criteria for Crypto Inclusion

The new directive will allow only cryptocurrencies that can be stored on the exchanges that are under regulation in the U.S. These transactions are regulated, and have their limitations, with the aim of being transparent and minimizing the risk of the fluctuations to the crypto market.

In addition, Fannie Mae and Freddie Mac are also ordered to establish internal risk valuation systems, which would take into account such variables as volatility in the markets to identify proportions of how much of a borrower can require its reserves to be expressed in cryptocurrencies.

This is a big stride towards the mainstreaming of cryptocurrency in the traditional finance. The move is in line with the greater interests of the Trump administration, which has expressed its aspiration to turn the U.S. into a global leader in the adoption of cryptocurrencies.

Risk Assessment and Volatility Considerations

Fannie Mae and Freddie Mac are now tasked with ensuring that cryptocurrencies do not cause undue risk to the mortgage system. The institutions are instructed to evaluate market volatility carefully when integrating crypto assets into risk assessments.

For example, a borrower’s total crypto reserves may be adjusted depending on price swings in the crypto market. These adjustments are designed to provide a balance between the potential of cryptocurrencies as an asset and the stability needed in the housing market.

The directive specifies that any changes to the assessment process will require approval from the boards of directors of both institutions before being submitted to the FHFA. This ensures that decisions regarding cryptocurrency integration into mortgage assessments undergo thorough review before implementation.