The U.S. Federal Housing Finance Agency (FHFA) has issued an order requiring that Bitcoin and other cryptocurrencies be considered in home loan valuations. This announcement by FHFA marks a significant integration of digital assets into the traditional American mortgage system and could reshape how millions approach homeownership.

What is the New Directive

The FHFA's order specifically instructs Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs) to develop proposals that formally recognize cryptocurrency as an asset in single-family mortgage loan risk assessments. Previously, these agencies only accepted crypto holdings if they were converted into U.S. dollars and deposited in regulated financial institutions. Now, borrowers will be able to retain their crypto assets without the need of converting them before applying for a mortgage.

FHFA Director Pulte emphasized that this initiative aligns with a broader vision to make the United States a global leader in crypto adoption, echoing former President Donald Trump's stated goal of establishing the country as the "crypto capital of the world". 

The Housing Market and Crypto’s Growing Role

The U.S. housing market has faced a significant decline in recent years, with mortgage originations dropping to near record lows in 2024. Key factors such as high interest rates, limited housing supply, and increased investor activity have made homeownership more challenging for many Americans. By allowing crypto holdings to count toward mortgage qualifications, the FHFA hopes to expand access to home loans and attract new buyers, particularly younger, tech-savvy individuals who may hold substantial wealth in digital assets.

How Will Crypto Be Evaluated in Mortgage Applications?

Under the new FHFA directive, only cryptocurrency assets that are verifiable and stored on regulated, compliant platforms will be considered in mortgage risk assessments. This ensures that only legitimate, traceable holdings are factored into loan decisions, addressing concerns about volatility, fraud, and regulatory compliance. Borrowers will still need to provide clear documentation of their crypto holdings, including transaction histories and proof of custody, to satisfy lenders’ due diligence requirements. This approach aims to balance the innovative potential of digital assets with the need for prudent risk management in the mortgage sector.

Impact on Crypto Market

The announcement has already started to show the effects in the crypto market. Bitcoin surged past $107,000 following the news, with its dominance in the crypto market rising to 66%. Industry leaders and advocates have praised the FHFA’s openness, viewing it as a major step toward mainstream adoption of digital assets.

Future Outlook

As Fannie Mae and Freddie Mac develop their proposals in response to the FHFA’s directive, the specifics of implementation will be closely watched by both the housing and crypto industries, such as valuation methodologies, risk management protocols, and compliance standards. If successful, the policy could serve as a blueprint for other financial institutions and regulators worldwide.

Final Thoughts

The FHFA’s order to factor Bitcoin and crypto into home loan valuations represents a pivotal moment in the convergence of traditional finance and digital assets, with the potential to transform both homeownership and the broader financial system in the years ahead.