US Considering Bitcoin for Mortgage Qualification Amid Housing Crisis

The Federal Housing Finance Agency (FHFA), the US government agency overseeing mortgage regulations, is exploring the possibility of including cryptocurrency holdings, particularly Bitcoin, as a factor in mortgage qualification. This initiative is part of a broader effort to address the declining number of mortgage applications amid a housing crisis in the United States. According to recent statements, the FHFA will examine how crypto assets can be considered when qualifying borrowers for home loans. While some specialized lenders already accept crypto as collateral, a formal study and potential recognition from the FHFA could significantly advance the adoption of cryptocurrencies in mortgage lending, especially as mortgage applications continue to decrease.

The US housing market is currently facing significant challenges, with mortgage originations reaching near-record lows and showing minimal signs of recovery. Contributing factors include insufficient housing supply, construction delays, increased investment purchases, and demographic factors such as elderly homeowners remaining in their homes. Additionally, higher interest rates set by the Federal Reserve to combat inflation have made borrowing more expensive, further suppressing mortgage activity. These conditions have prompted officials like Pulte, head of the FHFA, to consider innovative solutions such as crypto-based collateral to make borrowing more accessible for potential homeowners.

If the FHFA approves the use of cryptocurrencies like Bitcoin in mortgage qualification, it could open the door for federal programs such as FHA, VA, and USDA loans to incorporate crypto assets. Currently, federal lending programs do not permit crypto assets as collateral, partly due to regulations requiring cryptocurrencies to be treated as liabilities on balance sheets. However, with the growing acceptance and transparency of digital assets, advocates believe Bitcoin’s liquidity and blockchain transparency make it an ideal collateral option. Some industry experts suggest that integrating crypto into mortgage processes could also help stabilize related markets by reducing risks associated with mortgage-backed securities.

A small number of lenders already accept cryptocurrencies as collateral for loans, primarily serving investors purchasing second homes, vacation properties, or investment properties. These lenders acknowledge the risks involved, such as Bitcoin’s price volatility, which can lead to margin calls or forced liquidations if the asset’s value drops suddenly. Despite these challenges, the increasing ownership of cryptocurrencies among Americans—estimated at around 20%, with many holding portfolios under $50,000—indicates a growing market. Recognizing crypto assets in mortgage lending could potentially expand homeownership opportunities for this expanding demographic.