TLDR
- Lummis’ bill would require Fannie Mae and Freddie Mac to assess crypto in mortgage risk reviews.
- The 21st Century Mortgage Act bans mandatory crypto-to-USD conversions in underwriting.
- FHFA earlier asked both agencies to consider crypto reserves for loan risk assessment.
- Warren and Sanders oppose the plan citing risks to financial and housing market stability.
Republican Senator Cynthia Lummis has introduced new legislation requiring mortgage giants Fannie Mae and Freddie Mac to consider cryptocurrency holdings when assessing single-family mortgage applications. The bill would solidify a recent directive from the Federal Housing Finance Agency into law.
The 21st Century Mortgage Act aims to address the needs of younger Americans who own digital assets and face challenges qualifying for traditional mortgages. Lummis, known for supporting crypto regulation in Congress, said in a statement that the bill offers an updated approach to wealth building.
Bill Seeks to Align Mortgage System with Digital Asset Ownership
The legislation directs Fannie Mae and Freddie Mac to recognize crypto assets recorded on secure distributed ledgers as part of their mortgage risk assessments. Both entities buy loans from lenders to maintain liquidity in the housing market, and changes in underwriting rules can affect mortgage accessibility nationwide.
The bill further ensures that borrowers are not required to convert their crypto into U.S. dollars to qualify for a home loan. This clause addresses concerns that forced conversions could harm borrowers during market volatility.
“We’re living in a digital age, and rather than punishing innovation, government agencies must evolve,” Lummis said on Tuesday.
Her comments came one month after FHFA Director William Pulte issued instructions for both Fannie and Freddie to prepare proposals on how to incorporate cryptocurrency into reserve assessments for home loans.
Pushback from Democratic Lawmakers Over Market Stability Concerns
While the bill has support from crypto advocates, it faces growing opposition from several Democratic lawmakers. Last week, Senator Elizabeth Warren and Senator Bernie Sanders joined others in sending a letter to Director Pulte warning of the dangers of crypto volatility in mortgage evaluations.
They argued that adding digital assets to the underwriting process could introduce unnecessary risk into an already sensitive housing market. The lawmakers urged caution, citing the instability of crypto prices and its potential to disrupt financial systems.
“Expanding underwriting criteria to include the consideration of unconverted cryptocurrency assets could pose risks to the stability of the housing market,” the letter read.
Agencies Already Reviewing Digital Asset Risk Proposals
Fannie Mae and Freddie Mac, both created by Congress to support housing finance, are currently preparing responses to the FHFA directive. The move aligns with the Biden administration’s broader efforts to assess digital assets within existing regulatory structures.
Pulte’s directive to the agencies came amid rising calls for a clearer policy framework around digital assets and their use in traditional financial systems. The new bill would formalize these reviews and mandate that both entities continue exploring the role of crypto in mortgage lending.
If passed, the legislation could introduce the first legal requirement for federally backed mortgage agencies to account for crypto holdings. It would also establish legal protections for digital asset holders seeking access to home financing.
The 21st Century Mortgage Act adds to a growing list of federal proposals aiming to define crypto’s place in regulated markets. Its progress in the Senate will likely depend on bipartisan cooperation and further input from financial oversight bodies.
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