Mortgage Shake-Up: Fannie and Freddie Must Now Count Crypto as Down Payment Reserves

The newly proposed 21st Century Mortgage Act of 2025 is looking to modernize the mortgage rulebook. Specifically, Section 2 directs Fannie Mae and Freddie Mac—the giants backing most U.S. home loans—to start counting a borrower’s digital assets (think Bitcoin, Ethereum, etc.) as legitimate financial reserves when assessing risk for a single-family mortgage. The crucial change here is that borrowers won't be forced to sell their crypto holdings and convert them to cash just to prove they have the reserves to cover a few months of mortgage payments if things get tight. This is a big deal for anyone whose savings are heavily weighted toward digital assets, but it comes with some serious fine print.

The Rules of the Crypto Custody Club

Before you can use your crypto to qualify for a loan, the bill sets up some strict requirements for what counts and how it must be held. First, the digital asset must be recorded on a secure ledger and represent value, explicitly excluding “unique digital collectibles” (sorry, your expensive NFT profile picture probably won't count). Second, and most importantly, the assets must be held in a “qualified custodial arrangement.” This means a regulated third-party custodian—under U.S. jurisdiction—must hold the keys, or at least be part of a multi-signature setup. This rule is designed to ensure that the asset is actually there, verifiable, and can be liquidated if needed, adding a layer of security to an otherwise volatile asset class.

Risk Modeling: The Volatility Tax

Here’s where the policy meets reality. While Fannie and Freddie must consider these assets, they are also required to apply serious risk adjustments. They have to account for volatility (how much the price jumps around), liquidity (how fast you can sell it), and concentration (what percentage of your total reserves are tied up in digital assets). For example, if you have $100,000 in reserves, but $80,000 of that is in a highly volatile altcoin, the agencies might only count $20,000 or $30,000 toward your reserves after the risk adjustment. This means someone using crypto reserves might need significantly more value in digital assets than someone using traditional cash reserves to meet the same mortgage requirement. The agencies have to review and update these risk models regularly, and any major change needs approval from their Boards and the Director of the Federal Housing Finance Agency (FHFA).

What This Means for Everyday Borrowers

For the digital asset holder who’s struggled to qualify for a conventional loan because their wealth isn't sitting in a traditional bank account, this bill opens the door. It acknowledges that wealth exists outside of dollars and cents. However, for everyone else—including future mortgage applicants who stick to cash—there’s a potential downside. Integrating these volatile assets into the federally backed mortgage system introduces new complexity and risk. If the agencies have to constantly manage and model the risk of digital asset crashes, those costs could trickle down, potentially leading to slightly higher fees or stricter lending requirements overall to offset the systemic risk. The FHFA and the GSEs are taking on a huge, complex modeling job, and how they define “volatile” and “liquid” will determine who gets approved and who doesn't. Essentially, the price of modernizing the system might be paid by everyone through increased administrative burden and the introduction of a new layer of market uncertainty.