Wyoming Senator Cynthia Lummis has recently proposed a bill known as the 21st Century Mortgage Act. If passed, the new legislation would mandate that digital assets, including cryptocurrencies, be taken into account during the mortgage approval process in the United States. This bill comes in response to a June order from the US Federal Housing Finance Agency (FHFA), which suggested that mortgage suppliers like Fannie Mae and Freddie Mac include cryptocurrency assets when assessing borrowers’ eligibility. Senator Lummis believes that this move acknowledges the rising trend of young Americans owning digital assets and provides them with a transformative method to accumulate wealth.
However, this proposed change hasn’t been without criticism. Several Senate Democrats have criticized the FHFA’s order, suggesting that any potential risks and benefits of including digital assets in the mortgage process need to be thoroughly assessed, as well as their impact on the financial system and housing market. They argue that due to their volatility, holding cryptocurrency may increase a borrower’s risk of defaulting on their mortgage.
The aim of this bill, according to Senator Lummis, is to assist young American homeowners, many of whom struggle to find affordable housing. She believes it could provide a viable solution for individuals who would prefer not to convert their crypto assets into cash and who could instead use them as collateral for a mortgage loan.
With the Senate going on recess in August, this crypto-mortgage legislation is among three other cryptographic-related bills in line for evaluation. Apart from this, Lummis is also leading a bill on establishing a digital asset market structure in the Senate. Moreover, a bill preventing the Federal Reserve from initiating a central bank digital currency, which has already been approved by the House of Representatives, is also up for consideration.
The House of Representatives, currently on recess, has put forth a similar proposal through Republican Representative Nancy Mace’s American Homeowner Crypto Modernization Act, necessitating that mortgage lenders consider the value of any digital assets owned by the borrower. Meanwhile, internationally, an Australian-based firm, Block Earner, recently announced its plans to offer Bitcoin-backed mortgages after the Federal Court of Australia ruled that the company’s crypto lending products did not fall under financial products governed by the country’s Corporations Act.