It is not often that the federal government announces a policy change via the private company it benefits. But in March, a mortgage company called Better, and Coinbase, America’s largest crypto exchange, announced that Fannie Mae will extend its government guarantee to mortgages that use crypto-assets as collateral. 

The legitimization of crypto-assets, with minimal regulation, is something that has been top of mind for this Administration and the 119th Congress. Recently, the President issued an Executive Order, which encourages the integration of crypto-assets (“digital assets”) into every area of the U.S. financial system. This comes on the heels of other actions by the Administration like a proposed rule encouraging 401(k)s to invest in crypto, and legislation that will broadly deregulate the crypto industry and allow the tokenization of any financial assets.

In that context, it’s all the more concerning that Fannie Mae and its regulator, the Federal Housing Finance Agency, haven’t explained yet another crypto policy change or offered the opportunity for public input. Crypto-backed mortgages introduce significant risk into the mortgage market, and the federal government risks repeating the mistakes that led to the 2008 foreclosure crisis. This new product revives crisis-era “piggyback” loans, this time built on highly volatile and abuse-prone crypto-assets.

According to Pew, 63 percent of Americans think that crypto is unsafe, meaning most people would agree that the federal backing of crypto-collateralized mortgages is a dangerous proposition. Most people also remember the foreclosure crisis and the cascade of broken markets and lost homes that continued long after taxpayers bailed out Wall Street. 

Here’s how crypto-backed mortgages appear to work. A borrower takes out a traditional, Fannie Mae mortgage and also pledges crypto holdings as collateral for a separate down payment loan. This second loan, privately held by Better, features interest-only payments and comes with a lien on the borrower’s property. Meanwhile, Fannie Mae purchases the primary mortgage loan, wrapping it in a taxpayer-backed government guarantee that pays back investors if the borrower defaults. 

But this new product presents new risks. Borrowers using crypto-assets as collateral for a down payment will sign two distinct loans with two sets of fine print. Each loan will have different monthly payment amounts, borrowers’ rights, late-payment penalties, and rules governing borrower defaults. This complexity makes it hard for borrowers to understand what they are signing – especially because the second loan plays by a totally different set of rules. The loans create uncertainty about which company a consumer should prioritize in hard times and what happens to a person’s home and home equity if they default on their second, crypto loan. 

The volatility, technical complexity, and opaque nature of crypto markets only add to those risks and consequences. First, the value of crypto-assets is unpredictable. For example, in just the last year, Bitcoin has swung between a high of $123,000 in October 2025, to a low of $62,800 in February 2026. Nobody seems to know what drives these constant price moves. Even the crypto-assets that industry claims are most stable, called stablecoins, carry risks. Stablecoins in stressed markets have often fallen below their promised target. 

It is also unclear which consumer protection laws apply to crypto-loans. Hackers regularly steal crypto and rapidly move it out of the reach of authorities. What protections would consumers have in those cases? If that stolen crypto is irrecoverable, who bears the loss? 

If crypto valuations nosedive or the crypto-collateral is stolen, homeowners may be on the hook for more than just their monthly payments— it could cost them their hard-earned home equity. Homeowners who use crypto-assets for their mortgage likely also face a greater risk of default and forced sale. 

Many borrowers struggle to save money for a down payment and closing costs, especially the young and vulnerable. But this lending model incentivizes borrowers to fund their homeownership dream by investing in highly speculative crypto-assets rather than putting aside savings each month. Fannie Mae and FHFA add to this deceptive story by endorsing the product, wrapping it in the purported legitimacy of a government guarantee.

And it is not just borrowers who will be taking on new risks. Fannie Mae’s guarantee carries the full faith and credit of the U.S. government. Taxpayers foot the bill if something goes wrong. As a recent letter from seven senators highlights, this new policy amounts to a federal subsidy that exposes our shared financial system to crypto risks that most people prefer to avoid.

Marketing these loans as a tool to expand access to homeownership echoes subprime claims of the past. Without accountability and oversight we risk yet another market explosion. 

Though currently a niche market, government backing could supercharge the reach of these products – leaving everyday Americans with the risks and the crypto industry with the profits. That is not an innovation for consumers, it is an invitation for disaster.

Corey Frayer is the Director of Investor Protection for the Consumer Federation of America. Alys Cohen is Director of Federal Housing Advocacy and Acting Co-Director of Federal Advocacy at the National Consumer Law Center.