Falcon recently spoke with HousingWire to share his insights as a former predecessor of Pulte’s and to introduce Falcon Capital Advisors’ new digital asset practice, which advises mortgage lenders on the safe integration of crypto and other digital currencies into their operations.
This interview has been condensed and edited for clarity.
Sarah Wolak: Could you elaborate on your background as a regulator for government-sponsored enterprises (GSEs) and your current role?
Armando Falcon: I departed from the government approximately 20 years ago and transitioned into the consulting field. Over the past 17 years, I have built a management consulting firm specializing in the mortgage, credit, and capital markets. Recognizing the growing prominence of eNotes in the mortgage industry, I established an E-note digital mortgage practice group within the firm, dedicated to this emerging trend.
As the market dynamics evolve, we strive to stay ahead and assist clients in seizing new opportunities. This evolution has led us to delve into the realm of digital assets.
Wolak: Can you provide insights on your latest division, Digital Assets Advisors?
Falcon: Observing the developments in the digital currencies sphere, we perceive digital assets as encompassing crypto as well as other forms of digital assets like NFTs. With the regulatory framework around digital currencies taking shape under the Trump administration, we recognized the need to support clients navigating this evolving landscape.
Our inaugural webinar, scheduled in a few weeks, will focus on the evolving role of crypto in housing finance.
Wolak: What are some key considerations regarding Fannie’s and Freddie’s directive to prepare for crypto?
Falcon: Director Pulte’s directive to the GSEs to reassess the utilization of crypto in the underwriting process prompts discussions on the implications for originators, servicers, and investors. Understanding their risk appetite, internal risk management capabilities, competitive landscape, and compliance requirements will be crucial in determining their engagement with crypto-integrated mortgage origination.
Wolak: What challenges do the GSEs face in developing a framework for accepting crypto?
Falcon: Ensuring a safe and sound integration of crypto necessitates considerations such as the type of crypto permitted, liquidity, market trading, and regulatory compliance. Striking a balance between innovation and risk mitigation is paramount to prevent unintended consequences.
Wolak: How can Fannie and Freddie effectively integrate crypto into risk models?
Falcon: Implementing a pilot program to test the waters before widespread adoption could help identify and address any unforeseen risks or operational challenges. This phased approach allows for iterative improvements in risk management and internal controls.
Wolak: What are your thoughts on the FHFA’s directive?
Falcon: The FHFA’s directive signifies the ongoing evolution of the mortgage market, akin to the adoption of eNotes and ITIN mortgages. Viewing crypto as a form of currency and adapting underwriting and investment practices accordingly demonstrates the industry’s adaptability and resilience in navigating new frontiers.