Two consumer groups are urging Federal Housing Finance Agency Director William J. Pulte to abandon his directive that Fannie Mae and Freddie Mac explore counting cryptocurrency holdings as reserves in single-family mortgage underwriting.
In a letter sent Thursday, the Consumer Federation of America and the National Consumer Law Center said
"Underwriting standards at the GSEs must always account for borrowers' ability to repay and support the broader safety and soundness of the housing finance system," the consumer groups wrote, adding that cryptocurrencies "are notoriously volatile and offer no meaningful indication of a borrower's long-term financial stability or ability to pay their mortgage."
"This proposal will expose taxpayers to increased risk of losses, open the door to new forms of predatory and unsafe lending targeted at vulnerable borrowers and ultimately threaten the safety and soundness of the Enterprises and the broader financial system," the groups added.
Government-sponsored enterprises like Fannie Mae and Freddie Mac are backed by taxpayers. In 2008 the government bailed them out to prevent a housing market collapse.
The consumer groups argued that even stablecoins — assets marketed as steady stores of value, often pegged to fiat currencies — have seen volatility.
The letter also raised concerns about broader concentration risks, the crypto industry lacking regulatory oversight and the crypto market's historical susceptibility to fraud and hacking.
The consumer groups cited the collapse of FTX, a cryptocurrency exchange, as well as a North Korean hacking operation in February, the largest cryptocurrency heist in history. In that incident, $1.5 billion in ethereum tokens was stolen from Dubai-based cryptocurrency exchange ByBit.
The letter's signatories also said that embedding crypto in federally backed underwriting standards could give consumers the impression crypto assets are as stable and trustworthy as traditional reserves, distorting the broader mortgage market in the process.
"The 2008 crisis … was driven by the widespread underwriting of predatory, unaffordable mortgages, including in the subprime market," the consumer groups wrote. "Many of the loans that triggered the Great Recession were made without a reasonable expectation that borrowers could meet their mortgage obligations; similarly, a system built on crypto-related assets threatens to grow the market based on what may turn out to be a house of cards."
If niche borrowers wish to qualify for mortgages based on the cryptocurrency assets they own, the groups argue, they should turn to private nonqualified mortgage lenders that bear their own risk, leaving taxpayers unexposed.
"If crypto investors are seeking tailored mortgage products," they wrote, "that risk should remain in the private market — not in taxpayer-backed institutions."
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