Crypto Mortgage Rules Must Address Self-Custody

Owning cryptocurrency has gone from being something only a few people did to being a common way to save, invest, and get cash. Mortgage rules are having to catch up as digital assets make up a bigger part of household balance sheets. The most important change in the near future in the United States is an order from the Federal Housing Finance Agency (FHFA) telling Fannie Mae and Freddie Mac to come up with a way for cryptocurrency to be counted as assets for mortgage risk assessment without first being converted to U.S. dollars. That’s a possible change from the norm, where traditional loans usually require crypto to be sold for dollars and kept in a bank account for a while before it can be used for down payments, closing costs, or reserves. The directive also shows a preference for assets held in an exchange, but it raises questions about a world where people keep their own keys. Self-custody is an important part of how crypto works and how people use it, but most mortgage systems were built around bank and brokerage statements, not on-chain proofs. To make underwriting work with self-custody, lenders need to be able to use the same documentation standards, volatility controls, and anti-fraud measures every time. We’ll talk about how crypto is handled in most U.S. mortgage pathways today, where policy is likely going, and what beginners can do to keep track of their holdings, lower their risk, and meet lender expectations. It also talks about how regulators and lenders can recognize self-custodied assets without putting safety and soundness at risk.

Takeaways:

• Conventional loans still generally require crypto to be liquidated to U.S. dollars to count, pending new FHFA-directed proposals.
• The FHFA order focuses on using crypto as part of reserve assets and emphasizes risk controls; implementation details are not final.
• FHA and other government-insured programs require standard asset documentation in dollars; there is no published acceptance of unconverted crypto.
• Non-QM and specialty lenders may offer crypto-backed mortgages or loans using pledged BTC/ETH; terms, custody, and risks vary.
• Self-custody introduces documentation and valuation challenges; a workable framework needs proof-of-control, provenance, and volatility haircuts.

How U.S. Mortgage Programs Treat Crypto Today

Self-Custody vs Exchange Custody

Self-custody means that the borrower is in charge of the private keys, not a third-party platform. A centralized exchange or custodian holds the assets in exchange custody.

The current FHFA directive says that assets held on U.S.-regulated centralized exchanges should be counted, with risk mitigants for volatility and concentration. However, it does not yet set standards for self-custody. This shows the policy gap that your title talks about.

Risk Controls Likely to Appear in Policies:

• Volatility haircuts on counted value (for example, counting 70%-80% of market value for reserves) to buffer price swings. Early commentary suggests haircut-style approaches may be considered.
• Reserve composition caps, limiting how much of total reserves may be in crypto
• Seasoning and snapshot rules, requiring multiple balance snapshots across 30-60 days.
• Custody eligibility rules initially favored assets held on U.S.-regulated centralized exchanges.
• Provenance and AML checks, especially for self-custody addresses.
• Stress testing, modeling rapid drawdowns and liquidation timelines.

Practical Steps for Beginners Who Hold Crypto

1) Decide your path

• Conventional: monitor the FHFA process; until policies are adopted, liquidation to USD is generally required to count.
• FHA: plan to document USD funds under standard rules.
• Specialty lenders: evaluate crypto-backed products carefully; compare LTV, rate, custody terms, and margin call mechanics.

2) Build a documentation file

• Exchange statements or, for self-custody, signed messages proving control of addresses, address balance screenshots, and a simple ledger of deposits/withdrawals.
• Independent price references for valuation snapshots.

3) Reduce volatility risk ahead of time

• Consider diversifying across assets and stablecoins.
• Hold a portion of reserves in cash equivalents to avoid last-minute liquidations.

4) Avoid debt traps

• If you’re getting a separate crypto-backed loan to get cash, make sure to include the new payment in your debt-to-income calculations and read the terms of the margin call. Some companies offer quick funding based on BTC collateral. These are not mortgages, and there is a risk of losing money if they go bankrupt.

5) Keep everything simple and verifiable

• Clean, consistent records reduce underwriter friction and speed decisions.

What a Self-Custody-Friendly Rulebook Could Include

The following are policy options, not current rules:

• Proof-of-control standard: Signed message from eligible addresses plus ID linkage.
• On-chain provenance threshold: Assets free of taint per recognized analytics.
• Reserve haircut grid: Higher haircuts for more volatile assets or higher concentration.
• Seasoning period: Multiple snapshots over 30-60 days to show stability.
• Custody risk tiers: Exchange custody (Tier 1), qualified custodian with SOC reports (Tier 2), direct self-custody with enhanced verifications (Tier 3).
• Concentration limits: Cap percentage of reserves counted as crypto; require minimum cash component.
• Emergency liquidity plan: Documented steps to liquidate safely without market impact.

These steps are in line with the FHFA’s focus on volatility and reserve share controls, and they also make it possible to recognize self-custody in a way that is standard and can be checked.

Quick Checklist Before Applying:

• Asset inventory completed and reconciled
• Ownership proofs ready (statements or signed messages)
• Three valuation snapshots captured
• Reserve mix reflects lender caps
• If applicable, crypto-backed loan payment included in DTI
• Full paper trail prepared for any conversions to USD

Conclusion

Mortgage underwriting is starting to accept cryptocurrency as part of a borrower’s reserves, but this will only happen if there are clear guidelines. The FHFA’s order to Fannie Mae and Freddie Mac is a big policy signal, but the current rules still say that unconverted crypto isn’t eligible and that dollars are needed for verification. As proposals come together, lenders will probably use haircuts, reserve caps, seasoning rules, and clear custody eligibility to deal with fraud and volatility. The last step is to add self-custody in a way that keeps the main benefit of crypto, which is that individuals have control, while also giving underwriters proof of ownership, provenance, and value that they can trust. This would be possible if there were rules that included proof of control, on-chain provenance, concentration limits, and standardized valuation snapshots. This would also bring mortgage practice in line with how most people currently hold digital assets.

Frequently Asked Questions

Can crypto be used directly for a down payment on a conventional loan?

Not according to the GSE guidelines that are currently in place. As of now, crypto has to be sold and confirmed as USD before closing. The FHFA has told people to come up with plans to count crypto as reserves without converting it, but those plans haven’t been put into action yet.

What about FHA loans?

FHA needs standard paperwork for U.S. dollars for closing costs and the down payment. There is no official FHA acceptance of crypto that hasn’t been changed.

Will self-custodied coins count if new FHFA policies are adopted?

The directive and early comments stress assets held at U.S.-regulated centralized exchanges and ways to lower risk; there were no clear standards for self-custody. More information would be needed to add self-custody.

What risk controls might lenders use when counting crypto reserves?

Valuation haircuts, limits on the amount of reserves that can be held in crypto, seasoning rules, and volatility stress tests are all likely measures.

Are there lenders offering crypto-backed mortgages today?

Some specialty lenders offer crypto-backed mortgages or loans that are backed by pledged BTC or ETH. The terms vary, and these loans and mortgages usually don’t qualify for GSE. Carefully read the requirements for custody and margin.

Could a Bitcoin-backed loan be used to raise cash for closing?

Yes, but it’s a different loan that could raise your debt-to-income ratio and put you at risk of losing your collateral if it falls. You should compare terms and learn how margin calls work.

How can beginners document self-custody for underwriting?

Get signed messages from addresses, keep a record of all your transactions, take multiple pictures of your balance, and be ready to show where the money came from on the blockchain. These are useful steps, but whether lenders will accept them will depend on future policy.

Is this legal or tax advice?

No. This stuff is for learning. Get professional advice for your situation.

Written by Kent Baker Updated September 6, 2025 by Albert Fang