Falcon
sat
down
with

HousingWire
to
offer
his
perspective
as
a
predecessor
of
Pulte’s
and
to
showcase
Falcon
Capital
Advisors’
new
digital
asset
practice
that
advises
mortgage
lenders
on
how
to
safely
incorporate
crypto
and
other
digital
currencies
into
their
businesses.

This
interview
has
been
edited
for
length
and
clarity.

Sarah
Wolak:
Can
you
tell
me
about
your
background
as
a
regulator
for
the
government-sponsored
enterprises
(GSEs)
and
what
you
do
today?

Armando
Falcon:
I
left
the
government
about
20
years
ago.
I
went
into
the
consulting
business
with
another
group
of
people
and
eventually
set
up
my
own
firm.
And
so
for
the
past
17
years
or
so,
I’ve
been
building
a
management
consulting
firm
focused
on
not
just
the

mortgage
market,
but
also
credit
markets
and
capital
markets.

I
think
we
built
up
a
nice
niche
business
of
providing
basic
management
consulting
services,
and
we
try
to
be
on
the
leading
edge
of
developments
in
the
mortgage
market.
Several
years
ago,
I
saw
that
there
was
a
growing
movement
in
the

eNote
initiative.
So
I
formed
an
E-note
digital
mortgage
practice
group
within
the
firm,
and
I’ve
now
got
a
team
of
people
there
who
focus
on
that.

Whenever
we
see
the
markets
moving
in
a
certain
direction,
we
try
to
align
with
where
the
market’s
going
and
help
clients
take
advantage
of
new
opportunities,
as
the
mortgage
market
is
always
evolving.
And
that
sort
of
leads
into
the
whole
cryptocurrency
world.

Wolak:
Can
you
tell
me
about
your
latest
division,
Digital
Assets
Advisors?

Falcon:
We’ve
been
watching
what’s
going
on
with
the
digital
currencies
world.
We
view
digital
assets,
as
a
lot
of
people
say,
as
crypto
—
and
that
refers
to
digital
currencies
generally
—
but
the
whole
digital
space
is
more
than
crypto.

It’s
also
various
types
of
assets,
like

NFTs,
and
so
this
practice
group,
once
the
Trump
administration
decided
they
wanted
to
bring
some
regulatory
structure
around
the
digital
currency
world
—
and,
more
broadly,
digital
assets
—
we
thought
that
if
this
market’s
going
to
start
to
develop
within
a
well-established
regulatory
framework,
then
our
clients
and
new
clients
may
need
some
help.

Our
first
webinar
is
in
a
few
weeks,
and
that
will
focus
primarily
on

the
emerging
role
of
crypto
in
housing
finance.

Wolak:
Can
you
share
some
of
the
developments
you’ll
be
discussing,
specifically
about
Fannie’s
and
Freddie’s
directive
to
prepare
for
crypto?

Falcon:
Director
Pulte
instructed
the
GSEs
to
reconsider
how
crypto
is
utilized
or
not
utilized
in
the
underwriting
process.
And
so
we’ll
talk
about
some
of
the
implications
of
that
as
it
moves
forward,
and
what
potential
originators
and

servicers
and

investors
have
to
be
thinking
about
as
that
begins
to
get
implemented.

Wolak:
What
are
some
of
the
things
that
they
have
to
be
mindful
of?

Falcon:
We
have
to
think
about
what
the
risk
appetite
is.
Do
they
do
they
have
the
risk
appetite
and
the
proper
risk
management
practices
internally
to
originate
mortgages
in
the
way
that
the
agency
is
going
to
permit
crypto
to
be
utilized
in
the
underwriting
process?

They
will,
like
anything
else,
be
able
to
decide
if
they
want
to
engage
in
that
type
of
mortgage
origination
or
not.
They’ll
have
to
consider
what
the
competitive
advantages
and
disadvantages
are
if
they
don’t
get
involved.

So
the
next
step
is
to
make
sure
that
they
have
a
full
compliance
regime,

the
right
risk
management
practices,
the
right
amount
of
policies
and
procedures,
training
for
all
of
their
personnel,
and
make
sure
their
whole
investor
network
is
aligned
with
the
origination
of
these
types
of
mortgages.

Wolak:
What
about
the
hurdles
for
the
GSEs
when
developing
the
framework
to
accept
crypto?

Falcon:
They
have
to
make
sure
that
it’s
done
in
a
very
safe
and
sound
manner.
The
last
thing
they
want
to
do
is
to
authorize
something
that
creates
unintended
consequences.

It’s
one
thing
to
say
crypto
will
be
allowed
in
the
underwriting
process
for
getting
a
mortgage.
It’s
another
thing
to
ask,
well,
what
kind
of
crypto?
There
are
many
types
of
cryptocurrencies
out
there,
besides
just
Bitcoin.

Does
the
crypto
have
to
have
a
certain
amount
of
market
volume
so
it
is
very
liquid?
Does
it
have
to
be
traded
on
an
exchange
so
that
it’s
freely
bought
and
sold
and
converted
into
cash,
if
need
be?
All
these
things
have
to
get
figured
out
to
make
sure
it’s
not
the
wild
west,
right?

Wolak:
Based
on
your
experience,
what
do
you
think
it
will
take
for
Fannie
and
Freddie
to
safely
and
accurately
integrate
crypto
into
risk
models
as
they
move
forward
in
this
process?

Falcon:
I
think
one
good
step
would
maybe
to
do
this
as
a

pilot
program,
rather
than
wide-scale
permission
to
transact.
It
would
make
sense
to
start
with
just
the
pilot
program,
so
the
originators,
some
participants
in
the
pilot
program
on
the
origination
side,
can
do
some
transactions.
They
can
figure
out
if
there
are
any
hidden
risks
that
they
didn’t
anticipate
or
problems
with
the
transaction
itself.

Same
thing
for
the
regulator
—
they
can
assess
the
transaction
and
see
how
it
went,
and
decide
if
risk
management
and
internal
controls
were
adequate.

Wolak:
How
are
you
perceiving
the
FHFA’s
directive?

Falcon:
I
look
at
this
as
just
part
of
the
continual
evolution
of
the
mortgage
market.
You
know,
before,
I
mentioned
eNotes.
Who
would
have
ever
guessed
we
would
have
paperless
mortgages?
There
were
a
lot
of
hurdles
to
get
to
this
point
where
eNotes
are
now
accepted
by
investors
and
by
originators.

ITIN
mortgages
are
now
also
very
well
accepted
in
the
industry,
and
investors
put
money
into
them.
Maybe
crypto
will
end
up
being
treated
just
like
a
form
of
currency.

So
that’s
certainly
something
that
the
underwriting
process
can
handle
and
that
investors
can
figure
out.
Are
there
any
differences
in
those
mortgages
from
any
other
kind
of
traditional
mortgage?
I
think
the
industry’s
very
capable
of
figuring
this
out.