Five veteran U.S. Senate Democrats asked tough questions this week of housing finance director William Pulte. Senators Jeff Merkley, Elizabeth Warren, Chris Van Hollen, Mazie Hirono, and Bernie Sanders signed a detailed letter to him last Friday.
They wanted complete clarity that his new directive covering crypto assets under mortgage approval exercises wouldn’t involve converting to dollars. Senators expressed concern about possible monetary risk if lenders include crypto assets in traditional home loan appraisals.
In October, Pulte ordered Fannie Mae and Freddie Mac to submit recommendations on how crypto can be incorporated into single-family mortgage loan underwriting. The action sparked political uproar as both are under federal supervision since the 2008 mortgage meltdown.
The Democrats were concerned that crypto’s unpredictability as well as illiquidity could increase mortgage default risk for homebuyers. They explained that sudden drops in crypto prices can make it impossible for consumers to transfer funds to make mortgage repayments within time.
According to current laws, crypto assets are not yet acceptable to federally-backed mortgage appraisals unless they are first converted to U.S. dollars. According to legislators, scams, hackers, or theft can easily drain a homebuyer’s digital reserves with no chance of recovery.
FHFA faces pressure over Crypto oversight
They further expressed serious concerns about possible conflicts of interest between Pulte and persons closely affiliated with crypto businesses. According to disclosures of assets, Pulte’s wife owns up to $2 million of crypto investments in various digital platforms.
Senators were worried that Pulte’s order requires board approvals by panels that he himself leads and reportedly stocked with supporters. They warned this influence may improperly decide issues by Fannie Mae and Freddie Mac without explicit input or review process.
Senate members further asked FHFA to inform them how it would solicit feedback, estimate risks, and present equitable suggestions for crypto in home finance. They again stressed that not being clear about these steps could repeat previous failures of supervision such as 2023’s banking fiasco.
It referred to crypto related issues that resulted in the failure of three banks involved in speculative crypto asset exposure. In 2021, Fannie Mae even ranked crypto implementation within payment or collateral as least attractive blockchain related idea within home finance.
Senators requested a reply by August 7, asking for all communications regarding this order and also a plan to evade conflicts.
