A group of Senate Democrats has launched an investigation into Federal Housing Finance Agency Director William Pulte, focusing on his proposal to consider cryptocurrency in mortgage applications.
Five U.S. Senate Democrats are investigating the head of the nation's housing finance agency regarding his plans to incorporate cryptocurrency into certain mortgage approval processes.
Led by Senator Jeff Merkley, the senators sent a letter to Federal Housing Finance Agency (FHFA) Director William Pulte on Friday, requesting an explanation of his plans "to fully assess the potential risks and benefits of the order, as well as its impact on the U.S. real estate market and financial system."
Senators Elizabeth Warren, Chris Van Hollen, Mazie Hirono, and Bernie Sanders also signed the letter, asking Pulte to respond by August 7.
Last month, Pulte directed the mortgage buyers Fannie Mae and Freddie Mac to prepare a proposal outlining how to consider cryptocurrency holdings in the risk assessment of single-family mortgages without converting the cryptocurrency into dollars.
Since 2008, the Federal Housing Finance Agency has overseen Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corporation). Both companies were placed under government oversight following the financial crisis triggered by the collapse of the subprime mortgage market in 2008.
Buyers' Concerns Over Cryptocurrency Risks Intensify
The senators stated that Pulte's plan "could pose unnecessary risks to consumers and severely impact the safety and stability of the U.S. housing and financial markets."
They pointed out that under current policy, Fannie Mae, Freddie Mac, or any other federally backed mortgage issuer is not allowed to consider cryptocurrency in mortgage decisions unless it is first converted to dollars.
The senators also added that cryptocurrency is historically volatile and illiquid, expressing concern that borrowers using cryptocurrency face "increasing risks that they may not be able to exit their cryptocurrency positions and convert them to cash at prices that can buffer against mortgage default risk."
Excerpt from the letter from Democratic senators to William Pulte. Source: U.S. Senate Committee on Banking, Housing, and Urban Affairs
The senators stated: "Cryptocurrency also faces significant risks of loss due to fraud, hacking, or physical theft, which could lead homeowners to easily lose their crypto assets with little hope of recovery."
Democrats Claim Potential Conflicts of Interest in the Order
The senators also expressed concern about how the Federal Housing Finance Agency, Fannie Mae, and Freddie Mac would prevent conflicts of interest with individuals connected to cryptocurrency, "which could unduly influence their proposals," including those involving President Donald Trump and his family.
The Trump family is deeply involved in the cryptocurrency industry, with connections to a token trading platform, a stablecoin, a cryptocurrency mining operation, and various meme coins and non-fungible tokens.
The senators further questioned Pulte, noting that financial disclosures show his spouse holds up to $2 million in cryptocurrency, "raising further concerns about potential conflicts of interest."
They added that there is a "serious conflict of interest" because Pulte's order requires Fannie Mae and Freddie Mac to obtain approval from their respective boards before advancing reforms, but Pulte is the chairman of the boards of both organizations, and they accused him of colluding with "industry allies."
Senators Seek Clarity on the Order
The senators also claimed that Pulte's order is vague, failing to mention how Fannie Mae and Freddie Mac will formulate proposals, how the Federal Housing Finance Agency will assess risks and benefits, and how the agency will collect feedback.
They further stated: "Given the Federal Housing Finance Agency's previous failure to adequately regulate cryptocurrency-related activities, it is particularly important to clarify this order." They noted that during the banking crisis of 2023, three banks failed, "partly due to operational risks associated with the growth of cryptocurrency businesses."
The organization also pointed out that Fannie Mae found in 2021 that using cryptocurrency and stablecoins for deposits, payments, or mortgages is the "least attractive application of blockchain in the industry."
They requested Pulte to answer a series of questions, including sharing communications regarding cryptocurrency, the process for approving the order, and how he will avoid conflicts of interest.
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