Democrats are probing Trump's housing chief over a plan to allow crypto to count as an asset in mortgage lending
In June, FHFA director William Pulte announced a plan that would allow Fannie Mae and Freddie Mac to count cryptocurrency as an asset in mortgage lending assessments for single-family homes.
While many Republican officials responded positively to the proposal, Democratic senators, led by Jeff Merkley, are initiating a probe into Pulte's plan.
The group also includes Elizabeth Warren, Bernie Sanders, Chris Van Hollen, and Mazie K. Hirono.
Risks for home buyers
In a letter to the FHFA chief, the senators requested further information regarding the plan. They noted the high volatility of crypto and cited statements from consumer advocates who have expressed concern about tying the "lightly regulated and highly volatile investment asset" to the housing market, noting its importance to the broader economy.
"The 2008 crisis proved that lax financial practices around risky investments can blow up the housing market—and hardworking families in Oregon and across the country paid the price. Crypto poses serious risks to the stability of the housing market. This is a risk we must address," Sen. Merkley said.
The letter also references a report from Fannie Mae at the end of 2024 in which it listed crypto, private coins, and stablecoins as collateral as the "least appealing application" for blockchain technology.
They take aim at a part of Pulte's proposal that says crypto can be considered as an asset without converting it to dollars.
"Expanding underwriting criteria to include the consideration of unconverted cryptocurrency assets could pose risks to the stability of the housing market and the financial system," the letter said.
The senators also highlight potential risk regarding crypto liquidity, referencing a report from the Corporate Finance Institute that describes the market as "far from being as large and liquid as other financial markets that professional investors would normally participate in."
They also flag the high volatility in crypto as an issue they're concerned about.
"To the extent that historical volatility and liquidity persists even as the market matures, a borrower using crypto faces an increased risk that they may not be able to exit a crypto position and convert to cash at a price that would allow them to buffer against risk of mortgage default."
Potential conflicts of interest
The letter also includes concerns regarding conflicts of interest among Trump and other administration officials with ties to the crypto market.
The senators said such conflicts could "unduly influence their proposals" when it comes to further policies.
"You are the current Chair of each Board, and you have stacked the Boards with members who represent FHFA personnel and your industry allies," the letter said, addressing Pulte directly.
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