In recent weeks, Federal Housing Finance Agency (FHFA) director William Pulte has referred numerous political enemies of the president to the Justice Department for the alleged crime of mortgage fraud, claiming the falsification of documents and residence statuses. Pulte has taken significant criticism for facilitating President Trump’s revenge tour by taking highly irregular steps to pull applications on disfavored political figures, which in one case has led to Trump trying to fire Federal Reserve governor Lisa Cook.
At the same time, Pulte has announced changes in mortgage underwriting that could easily lead to confusion and error in assessing creditworthiness. If there’s more mortgage fraud in the future, Pulte could be to blame.
On June 25, FHFA ordered Fannie Mae and Freddie Mac, which package and securitize loans for investors in the housing market, to develop proposals allowing them to “count cryptocurrency as an asset for a mortgage” during the application process. As a result, prospective homebuyers may soon be able to put up their volatile crypto holdings as collateral without needing to convert those assets to cash.
In a post on X, Pulte said the decision came after “significant studying,” but critics cast doubt on the impetus behind his order, noting that Pulte announced it on the heels of some online exchanges with members of the crypto community.
“It’s just unusual to me because it’s not consistent with my understanding of past policymaking practice at FHFA,” Amanda Fischer, policy director at Better Markets, told the Prospect. “It seemed to be based on some tweets.”
Currently, stocks, stock options, bonds, and mutual funds can count as “reserve assets” in mortgage underwriting, though a certain percentage of those assets is deducted to account for the type of asset and potential losses. Even valuables, collectibles, vehicles, and business interests can count. These assets can be used for down payments or closing costs, though they would have to be liquidated for that purpose.
Supporters of the change say that crypto is like any other asset and should be eligible in underwriting. But the high volatility of crypto, particularly meme coins and other speculative vehicles, as well as the prevalence of crypto scams and rug pulls, could rapidly turn a stable balance sheet into an unstable one.
Fischer said FHFA could incorporate digital assets into the underwriting process by either considering crypto as a reserve asset or counting it as income toward the debt-to-income ratio that qualifies borrowers. The latter would be “more aggressive,” and also “more dangerous,” she noted.
In an August 14 letter, the advocacy groups Consumer Federation of America (CFA) and National Consumer Law Center (NCLC) urged Pulte to reverse course, arguing his decree would weaken mortgage underwriting standards while detracting from Trump’s stated goal of ending Fannie and Freddie’s government conservatorship and privatizing the mortgage giants. “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,” the groups wrote.
OBVIOUSLY, INCLUDING CRYPTO IN UNDERWRITING would make holding crypto in a personal portfolio more attractive, and could increase the value of crypto, at least in the short term. That’s where the Trump Organization’s many financial entanglements with the industry come into play. As The New Yorker enumerated recently, the Trump family has seen estimated gains in the billions from crypto ventures in the past year alone, and according to State Democracy Defenders Fund, digital assets most recently accounted for 37 percent of President Trump’s net worth.
Donald Trump Jr., for example, serves on the advisory board of his brother’s crypto mining company, and is “Web3 Ambassador” to World Liberty Financial—a crypto company he and his brother Eric co-founded last year. The Trump family’s financial success is at least partially dependent on crypto’s future.
Earlier this year, Trump Jr. also co-founded the Executive Branch club, alongside President Trump’s crypto and AI czar David Sacks, Canadian-American billionaire and Bitcoin investor Chamath Palihapitiya, and owners of crypto trading platform Gemini Tyler and Cameron Winklevoss, among others. The Executive Branch, which has been described as a refuge for like-minded people to socialize away from “journalists and Democrats,” requires members to pay an initiation fee of up to half a million dollars.
Pulte, the scion of a major homebuilder, also has a seeming affinity for crypto. His financial disclosure form, released in January, lists an investment of between $500,000 and $1 million in Bitcoin, between $500,000 and $1 million in a digital token from crypto firm Solana, as well as between $5 million and $25 million in Mara Holdings, a Bitcoin mining company. All of these investments were listed under “other assets and income,” which could refer to Pulte himself or his spouse.
But the biggest influence on this new rule comes from the president and his family’s interests in crypto tokens, meme coins, stablecoins, and other digital assets. In Trump’s second term, the industry has had the freedom to write its own rules and evade prosecutions, while the Trump Organization has gotten rich.
Pulte’s past service on behalf of Trump shows who exactly calls the shots. While the Fannie and Freddie boards of directors must approve the changes, this is less than a formality because Pulte has stacked the deck. In one of his early actions, Pulte fired the majority of members on the boards and replaced them with several allies, while making himself the chair. Notable appointments include FHFA general counsel Clinton Jones to both boards, and Brandon Hamara—who previously worked for the Pulte family’s homebuilding business—to the Freddie Mac board of directors. Another new Fannie Mae board member, Omeed Malik, is a business partner with Trump Jr. in 1789 Capital, which has some investments in companies that leverage blockchain infrastructure, a type of decentralized, publicly viewable digital ledger all cryptocurrencies rely on. (Malik also co-founded the Executive Branch.)
It is highly unusual for the conservator of Fannie and Freddie to also chair their boards. Senate Democrats have questioned Pulte, citing “a serious conflict between your ability to order and approve [Fannie and Freddie’s] proposals as FHFA Director and to ultimately influence the development of such proposals as Chair of the Enterprises’ boards.” They asked whether he planned to divest of the family crypto assets or recuse himself from any decision-making role on the crypto rule. FHFA did not respond to a request for comment.
GIVEN THAT HOMEBUYERS HAVE RARELY USED proceeds from crypto sales to make a down payment, the move to revise underwriting standards may only benefit a select number of (presumably high-net-worth) individuals. “There’s no faster way to inject uncertainty and instability into the home mortgage market and financial system than by entangling it in crypto, but it’s never the people responsible who pay the price when the bubble bursts. American working people do,” said Tony Carrk, executive director of Accountable.US.
CFA and NCLC denounced the crypto proposal in their letter, arguing that it would invite “new forms of predatory and unsafe lending targeted at vulnerable borrowers.” Traditional crypto is extremely volatile, and while stablecoins are intended to be pegged to the U.S. dollar, having minimal volatility does not mean they are less risky. Perceived financial turmoil could be enough to trigger mass withdrawals from stablecoin issuers, which would do much to create a disaster that mirrors the collapse of FTX and the ensuing bank run at Silicon Valley Bank in March 2023.
“The more that crypto gets integrated with mainstream financial products, the more that the risks of that market aren’t just quarantined to people who choose to invest in crypto,” Fischer told the Prospect. “They can become everybody’s problem.”
In any case, the industry has demonstrated rampant noncompliance with anti–money laundering laws, and crypto exchanges are particularly vulnerable to cybersecurity threats. Hackers stole $1.5 billion from ByBit and $400 million from Coinbase during the first half of this year.
“Many of those irrecoverable assets resided in the kinds of customer accounts this Administration would have Fannie and Freddie consider in their underwriting standards,” CFA and NCLC wrote in their letter. “Exposing the trillion-dollar housing sector to such an unstable foundation could undermine not only the Enterprises but also the U.S. financial system as a whole.”