US government-sponsored mortgage agency Fannie Mae to introduce 'crypto-collateralized loans'

Fannie Mae, one of the two US government-sponsored mortgage guarantors, is moving to allow crypto-backed loans.

The Wall Street Journal (WSJ) reported on the 26th (local time) that Fannie Mae is set to introduce, for the first time, mortgages secured by cryptocurrency. The WSJ said that mortgage lender Better Home & Finance and US crypto exchange Coinbase Global are expected to announce a new mortgage product that would allow homebuyers to pledge their cryptocurrency as collateral when using Fannie Mae-guaranteed mortgages.

The WSJ described the product as “another example of cryptocurrency becoming more deeply embedded in mainstream financial transactions.” It noted that while crypto-based mortgage products are not entirely new, Fannie Mae’s participation increases the likelihood such products will become more mainstream, adding that Fannie Mae is backed by the US federal government and overseen by the Federal Housing Finance Agency (FHFA).

Expectations are also rising that Fannie Mae’s crypto-based mortgage product could channel substantial homebuying funds into the crypto market. According to Gallup, about 14% of US adults owned cryptocurrency as of last year. Max Branzburg, head of consumer and business products at Coinbase, said, “Many crypto investors haven’t been able to become homeowners because they didn’t want to sell their investment assets,” adding, “We effectively haven’t had an appropriate way to meet that demand.”

Meanwhile, the FHFA in June last year directed mortgage guarantors such as Fannie Mae to develop ways to use cryptocurrency as collateral. Josip Rupena, CEO of US fintech firm Milo, said, “As digital assets become increasingly mainstream, financial products that connect cryptocurrency to real-world use cases will continue to gain momentum.”