Bitcoin May Soon Qualify As Collateral for Mortgage Underwriting In US

The U.S. Federal Housing Finance Agency (FHFA) has announced a potential consideration of crypto holdings in determining mortgage eligibility. This move intends to allow crypto assets like Bitcoin to be factored into income and wealth assessments for home loan qualifications.

Can Crypto Holdings Be Used as Mortgage Security?

In a recent X post, US Federal Housing Finance Agency Director Bill Pulte announced plans to assess the potential use of crypto holdings in the mortgage qualification process. He noted, “We will study the usage of cryptocurrency holdings as it relates to qualifying for mortgages.” This move signals the recognition of cryptocurrencies in real-world finance.

However, the US regulator has not yet disclosed specifics on how crypto holdings would be evaluated. If materialized, the FHFA will include Bitcoin and other cryptocurrencies in mortgage underwriting, alongside traditional “three C’s” — Credit, Capacity, and Collateral.

Notably, the FHFA oversees critical components of the US housing market. This includes Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. Currently, these entities require applicants to convert their crypto assets to US dollars and hold them in a federally or state-regulated institution. Recognizing crypto as a fourth ‘C’ of mortgage assessment could benefit applicants with substantial digital assets. It enables them to utilize these assets in the mortgage process without having to convert them to cash beforehand.

The prospect of incorporating crypto holdings into mortgage underwriting has sparked intense discussion within the digital asset community. Various community members have weighed in on its potential implications. Prominent figures, including Michael Saylor and Paul Grewal, have added their voices to the conversation, sharing their perspectives on this development.

In response to Bill Pulte’s thread, Strategy’s Michael Saylor announced that they have developed a Bitcoin credit model. He added that the model is available on their website. The model considers factors such as loan duration, collateral coverage, Bitcoin price, volatility, and outlook for Bitcoin’s average annual return rate to generate statistical Bitcoin risk and credit spreads.

At the same time, Coinbase CLO Paul Grewal shared a tongue-in-cheek comment in response to Bill Pulte’s post. He is implying that the potential for crypto to be used as mortgage security is a significant development. Grewal wrote, “Crypto as mortgage security. Probably nothing.”