A group of five Democratic senators has launched a probe into the Federal Housing Finance Agency director William Pulte for his June directive on considering crypto in mortgage applications. The probe, led by Jeff Merkley, Elizabeth Warren, Bernie Sanders, Chris Van Hollen, and Mazie Hirono, will look into Pulte’s directive to explore crypto holdings as qualifying assets in mortgage applications.
If this directive is honored, it means crypto would be accepted even if not converted to cash, provided the assets are in the custody of a regulated U.S. exchange. This move will change U.S. housing application and further legitimize cryptocurrency in the country, as regulations continue to shape the industry.
What Does William Pulte’s Directive Entail
Pute directed the government-enterprises Fannie Mae and Freddie Mac to draft proposals for the incorporation of digital assets in mortgage assessments. The objective is to broaden access to affordable housing without liquidation, allowing liquidity flexibility for holders. The FHFA has supervised Fannie Mae and Freddie Mac since 2008, after the financial crisis, caused by the collapse of the mortgage market.
This move aligns with Donald Trump’s pro-crypto policies, as he aims to position the United States as a global crypto leader. However, the effort raises constitutional and risk concerns, which the Democratic senators have highlighted in a letter to the FHFA. The senators asked Pulte to explain how he plans to fully assess the potential risks and benefits of his order and its implications for the United States’ housing and economy.
The senators said Pulte’s orders have multiple red flags, including instability and fraud. They said crypto’s volatility may cause exchange liquidity constraints or even a crash that may affect borrowers. Additionally, they said borrowers may face assets disappearing mid-underwriting if an exchange hack occurs.
Democrats’ Concerns Extend to Conflict of Interest
The senators said Pulte’s plans may pose serious risks to consumers and the U.S. housing and financial markets. However, they are more concerned about how the FHFA will prevent conflicts of interest for those with crypto ties. In some findings, the senators discovered that Pulte’s spouse holds up to $2M in crypto.
They also highlighted the involvement of President Donald Trump and his family, and how they could unduly influence the proposals. Trump and his family are deeply involved in crypto, having ties to a mining business, stablecoin, and even a meme token. The senators said these are serious conflicts of interest that could unduly influence the proposals, especially as Pulte heads both Fannie Mae and Freddie Mac.
Jeff Merkley and other Democrats agree that Pulte must provide more clarity on the order. Additionally, he must include information on how Fannie Mae and Freddie Mac would develop a proposal. “Clarity on this order is especially critical given FHFA’s previous failures to adequately oversee crypto-related activity.” They referenced the 2023 banking crisis, where three banks collapsed due to their crypto-related businesses.
The Order Has Some Potential Upsides for Crypto Holders
Experts argue that the policy favors crypto holders, especially those with a considerable amount. They could instantly qualify for mortgages without forcing sales. For the mortgage lenders, it saves some paperwork.
Those buyers with strong net worth who have crypto reserves could provide liquidity with their assets. By allocating 70 to 80% of their assets towards mortgages, this could unlock lending and modernize underwriting in an otherwise stagnant housing market.
The bigger picture is how the United States will be projected if this directive is implemented. It signals a shift in the U.S. financial market and further legitimizes cryptocurrency. This could also open doors for tokenized securities, but may introduce risks and heightened security.
What’s Next for William Pulte?
Traditionally, mortgage lenders don’t accept cryptocurrency directly for down payment unless converted to cash. This rule might change if Freddie Mac and Fannie Mae implement Pulte’s directive. But Pulte must answer the senators’ questions before August 7, 2025, before proceeding.
Pulte’s order came with no clear disclosure, and his conflict of interest is questionable. He heads both Fannie Mae and Freddie Mac, and his spouse holds a considerable amount of cryptocurrency. He’d need to explain some things, including risk assessments, his conflict of interest, and oversight protocols.
The Democratic probe highlights the gaps in transparency, risk assessment, and oversight. The outcome of the probe will be pivotal for how digital assets will integrate with the credit systems. Fingers crossed!
