Original Source: The New York Times
Translation: BitpushNews
The largest mortgage financing companies in the United States will begin accepting cryptocurrency as an asset in mortgage applications, marking another significant move by the Trump administration to integrate digital currencies into the mainstream financial system.
This week, William Pulte, the head of housing affairs under President Trump, announced that he would instruct the two major mortgage financing companies—Fannie Mae and Freddie Mac—to consider cryptocurrency investments as part of a buyer's overall wealth when assessing their ability to afford a mortgage. Traditionally, mortgage institutions have focused on buyers' cash savings and stock investments.
As key components of the housing market, Fannie Mae and Freddie Mac purchase mortgages from banks and set a range of standards to determine which borrowers' mortgages to accept.
As Mr. Pulte announced this news on Wednesday, an increasing number of Americans have been using digital currencies to purchase homes, and newly established companies are helping them leverage their cryptocurrency holdings to buy real estate.
For years, the cryptocurrency market and its many supporters have been pushing regulators in this direction, raising concerns among consumer advocates who believe that this loosely regulated and highly volatile investment asset is being tied to critical economic sectors like the housing market.
Mr. Trump has transformed from a critic of cryptocurrency to a strong supporter.
"In a world where regulatory enforcement has essentially been put on hold, boundaries are being rapidly crossed," said Tyler Gellasch, a former lawyer at the Securities and Exchange Commission (SEC) who now operates the financial industry trade organization Healthy Markets Association.
However, the demand from homebuyers and cryptocurrency enthusiasts is growing. According to a recent survey by residential real estate brokerage Redfin, about 14% of homebuyers indicated that they plan to sell cryptocurrency assets to raise cash for a down payment, up from 5% in 2019.
In 2017, David Doss sold part of his cryptocurrency holdings to raise cash for a down payment on a house in New Jersey. He expressed a desire for a way to retain his cryptocurrency while obtaining equivalent cash, but such an option was not available when he bought his home.
"The intersection of cryptocurrency and real estate is developing quite rapidly," said Mr. Doss, who provides cryptocurrency investment advice to wealthy investors, "This is the meeting of the oldest asset class with the newest asset class."
Mr. Pulte's directive could allow Mr. Doss to retain some of his cryptocurrency assets. The directive states that homebuyers no longer need to sell their cryptocurrency to obtain cash during the mortgage qualification process.
As home sales stagnate, the influence of cryptocurrency in the housing market is increasing. The sales slowdown has left many unable to sell or buy homes or leverage their home equity through loans.
Some startups are already marketing cryptocurrency as a way to break through the current market impasse and revive home sales.
One such company, Milo, founded by former Morgan Stanley financial advisor Josip Rupena, offers investors a way to obtain a home loan using Bitcoin as collateral.
For a $1 million home, investors must deposit $1 million worth of Bitcoin, which Milo places in a secure account. The company then provides $1 million in cash to purchase the home.
Subsequently, Milo issues a corresponding mortgage, which the homebuyer is responsible for repaying. The interest rates are typically a few percentage points higher than standard mortgages, but the benefit for clients is that they do not have to sell any cryptocurrency or pay capital gains tax. When the mortgage is paid off, Milo returns the Bitcoin to the investor.
Mr. Rupena stated that he has underwritten $65 million in such mortgages and welcomed the Federal Housing Finance Agency's shift in cryptocurrency policy.
Unlike most bank mortgages (such as those purchased by Fannie Mae and Freddie Mac), Mr. Rupena's company does not require homeowners to make a down payment. His company provides financing for 100% of the transaction, which most banks do not do, and the new Federal Housing Finance Agency regulations regarding cryptocurrency are unlikely to change this.
"This is the first step in giving cryptocurrency equal status with other assets," Mr. Rupena said regarding the Federal Housing Finance Agency's decision.
Other companies are helping homeowners leverage their home equity to purchase cryptocurrency. Their strategy is similar to so-called home equity investment contracts, which provide homeowners with a one-time cash payment in exchange for sharing in the appreciation of their home's value.
However, unlike homeowners using the cash from this transaction for home renovations or children's college tuition, they are using it to purchase one thing: Bitcoin.
A startup called Horizon posted on the X platform: "Turn your home into a Bitcoin acquisition engine."
Its typical operation works as follows: some companies issue loans to homeowners based on the value of their home equity to purchase Bitcoin. These companies typically profit by sharing in the appreciation of the home's value when the homeowner sells the house.
These types of transactions are attractive because, during the term of the agreement, homeowners do not have to make monthly payments like traditional home equity loans.
As a safeguard, some companies also place a lien on the home during the contract term (some contracts may last up to ten years).
Horizon launched its services last month at a Bitcoin conference in Las Vegas, where Trump's two sons were keynote speakers.
Consumer advocates see reasons for concern.
"My overall impression is that placing any lien on your house to purchase cryptocurrency is a bad idea," said Andrew Pizor, a senior attorney at the National Consumer Law Center, which specializes in mortgage financing. "This is your home, your shelter, and you must proceed with caution."
All of these projects are in their infancy, so it is too early to determine how much impact they will ultimately have.
Representatives from related companies claim that concerns about consumers being taken advantage of are exaggerated. Most potential clients are wealthy investors. These companies also state that they intend to comply with existing federal and state laws.
Harry W. Prahl, 35, who has been investing in Bitcoin since 2016, expressed interest in leveraging the equity in his primary residence and several apartment buildings to purchase more of the cryptocurrency.
Mr. Prahl has been in discussions with a company called Sovana, founded by a former Google executive, which aims to use part of his real estate assets as collateral to buy more Bitcoin. Sovana will purchase Bitcoin based on a formula related to the individual's property equity and then deposit the cryptocurrency into a secure account. At the end of the transaction, the individual and the company will share the profits.
If Bitcoin depreciates, the homeowner must make up the difference.
"This is an alternative way to leverage business equity without affecting business operations," Mr. Prahl said, "and not having to make any payments is a real killer feature."
While the details of the Federal Housing Finance Agency's policy shift remain unclear, on the surface, it marks a change in the Trump administration's regulatory approach to Fannie Mae and Freddie Mac. Under previous administrations, these companies tended to avoid risk after nearly collapsing due to millions of homeowners defaulting on mortgages during the financial crisis.
Mr. Pulte stated in a post on the X platform about the new policy that he made the decision to allow Fannie Mae and Freddie Mac to count cryptocurrency as part of buyers' assets after "a lot of research."
He added that this was "in response to President Trump's vision of making the U.S. the world's cryptocurrency capital."
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