The nation’s largest mortgage finance firms will begin accepting crypto as an asset on a mortgage application, another significant step by the Trump administration to bring digital currencies into mainstream finance.
This week, President Trump’s housing director, William Pulte, said he would direct Fannie Mae and Freddie Mac — the nation’s big mortgage finance firms — to consider home buyers’ crypto investments as part of their overall wealth in assessing whether they can afford a mortgage. Traditionally, a home buyer’s cash savings and stock investments are what mortgage lenders consider.
Fannie and Freddie, which are a critical cog in the housing market, buy mortgages from banks and establish a set of criteria for which borrowers’ mortgages they will accept.
The announcement by Mr. Pulte, director of the Federal Housing Finance Agency, on Wednesday comes as an increasing number of Americans have been using digital currencies to buy houses and new companies have formed to help them take advantage of their crypto holdings to buy real estate.
The crypto market and its many supporters have been pushing regulators in this direction for several years, raising concerns among consumer advocates that this lightly regulated and highly volatile investment asset is being tied to something as vital to the economy as the housing market.
And Mr. Trump has gone from a crypto critic to a big booster.
“In a world where regulatory enforcement has been largely taken off the table, the boundaries are getting pushed very quickly,” said Tyler Gellasch, a former lawyer at the Securities and Exchange Commission, who runs the Healthy Markets Association, a financial industry trade group.
But from home buyers and crypto enthusiasts, there is growing demand. In a recent survey, roughly 14 percent of home buyers said they planned to sell crypto assets to help get the cash to cover a down payment on a home, up from 5 percent in 2019, according to Redfin, the residential real estate brokerage company.In 2017, David Doss sold some of his crypto holdings to raise cash for the down payment on a home in New Jersey. He said he would have preferred that there had been a way to keep his crypto while getting the cash equivalent but that option didn’t exist when he bought his house.
“The intersection of crypto and real estate is evolving pretty darn quickly,” said Mr. Doss, who advises wealthy investors on crypto investing. “It’s a meeting of the oldest asset class with one of the newest.”
Mr. Pulte’s order might have allowed Mr. Doss to keep some of his crypto holdings. It says that home buyers no longer have to sell their crypto for cash as part of the process of qualifying for a mortgage.
Crypto is gaining traction in the housing market as home sales have stagnated, leaving many unable to sell or buy a home or tap into their home’s equity through loans.
Several start-ups are already pitching crypto as a way to cut through the market’s current morass and jump start home sales.
One firm, Milo, founded by Josip Rupena, a former financial adviser at Morgan Stanley, offers investors a way to use Bitcoin as collateral for getting a home mortgage.
For a $1 million home, an investor posts $1 million worth of Bitcoin, which Milo puts into a secure account. The firm provides $1 million in cash to buy the home.
Milo then writes an equivalent mortgage that the home buyer is ultimately responsible to pay off. The interest tends to be a few percentage points higher than a normal mortgage, but the customer gets the benefit of not having to sell any crypto or pay capital gains. When the mortgage is paid off, Milo returns the Bitcoin to the investor.
Mr. Rupena said he had already underwritten $65 million of such mortgages, and he welcomed the F.H.F.A.’s policy shift on crypto.
Unlike most bank mortgages — like the ones Fannie and Freddie buy — Mr. Rupena’s firm does not require a homeowner to make a down payment. His firm finances 100 percent of the transaction, which most banks will not do and that is not likely to change with the new F.H.F.A. rule on crypto.
“This is the first step in getting crypto parity with other assets,” Mr. Rupena said of the F.H.F.A. decision.
Other firms are helping homeowners’ tap their home’s equity to buy crypto. The strategy is similar to so-called home equity investment contracts, which provide lump-sum cash payments to a homeowner in return for the right to share in the appreciation in a home’s value.
But instead of the homeowner using cash from the deal to pay for home improvements or a child’s college tuition, they are using it to buy only one thing: Bitcoin.
“Turn your home into a Bitcoin acquisition engine,’’ one of the start-up firms called Horizon, said in a post on X.
Here is how it typically works: Some of the firms loan the homeowner cash to buy Bitcoin based on the value of the equity in their homes. The firms typically make money by sharing in the appreciation in the value of a house when an owner sells it.
The deals are attractive because the homeowner does not need to make monthly payments during the life of the agreement, as they would with a traditional home equity loan.
As protection, some of the firms also place a lien on a house during the length of the contract — some of which can last for a decade.
Horizon debuted its offering at the Bitcoin conference last month in Las Vegas, where two of Mr. Trump’s sons were headline speakers.
Consumer advocates see reason for concern.
“My general impression is that taking any lien on your house to buy crypto is a terrible idea,” said Andrew Pizor, a senior attorney at the National Consumer Law Center, who specializes in mortgage financing. “This is the roof over your head, and you have to be cautious.”
All of these programs are in their infancy, so it’s too soon to say how much traction they will ultimately get.
Representatives for the companies said concerns about consumers being taking advantage of were overstated. Most prospective customers are wealthy investors. The firms also said they intended to be compliant with existing federal and state laws.
Harry W. Prahl, 35, who has been investing in Bitcoin since 2016, said he was interested in tapping the equity in both his home and in several apartment buildings he owned to buy more of the crypto currency.
Mr. Prahl has been talking to a company called Sovana, which was founded by a former Google executive, about using some of his real estate holdings as collateral to buy more Bitcoin. Sovana would buy Bitcoin, using a formula based on the equity in a person’s properties, and then put the crypto currency into a secure account. At the end of the deal, the person and the company would share the profits.
If Bitcoin drops in value, the property owner must make up the deficiency.
“It’s an alternative way to tap into that commercial equity that doesn’t effect the business,” Mr. Prahl said. “And not having to make any payment is a real killer feature.”
Though the details of the F.H.F.A.’s policy shift are scare, on its face it signals a shift in how the Trump administration is overseeing Fannie and Freddie. Under past administrations, the two firms have tended to be risk averse after nearly collapsing during the financial crisis when millions of homeowners defaulted on their mortgages.
In a post on X about the new policy, Mr. Pulte said he made the decision for Fannie and Freddie to count crypto among home buyers’ assets after “significant studying.”
He added that it was in “keeping with President Trump’s vision to make the United States the crypto capital of the world.”
Matthew Goldstein is a Times reporter who covers Wall Street and white-collar crime and housing issues.
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