In this series of interviews, we focus on the people who are shaping the state of housing at the top: policy and regulatory experts. The FHFA and the GSE are essential in painting the picture of the current real estate market and industry trends. To help shed some light in this area, several of HousingWire’s 2022 reports vanguard honorees They shared their thoughts on what is happening at the federal level that will affect housing this year and in 2023.
Armando Falcón, CEO of Falcon Capitol Advisors
Housing wire: What trends in housing regulation are you and your team focusing on the most as we move into 2023?
Armando Falcon: Looking ahead to 2023, there are a couple of general trends that we’re focusing on. The first is the general business transformation that is taking place in the mortgage industry. This is the result of several forces: the Fed’s anti-inflation policy; the rapid slowdown in lending that resulted in a 40% drop in applications; the rising cost of producing mortgages, which have now passed the $10,000 per loan threshold; and the continued drive towards digitization in mortgage lending.
These are the most important thing to my team, our clients and the industry. The second general trend is home ownership access and affordability. Home prices have never been higher, pent-up demand is stronger, and housing inventory is tighter. These conditions are challenging even for the average homebuyer, let alone low-income and minority buyers.
There is a growing sentiment in both the public and private sectors that more needs to be done to help consumers, particularly underserved buyers, prepare for homeownership and close the affordability gap. We are seeing new energy and new initiatives in this area in many housing and mortgage agencies.
Similarly, large lenders are expanding their ESG and social responsibility programs. The commitment is real, and we see it growing stronger.
HW: As a Vanguard 2022 honoree, what has been your biggest accomplishment?
FA: Is it okay to say that I’m proud to build a consulting firm made up of very talented people who are helping the mortgage industry adjust to a market in transition? That I’m proud of the role you’re playing in helping modernize mortgage production and the secondary market? Because I am.
Over the past 15 years, our group has grown to more than 50 associates, many of whom have held leadership positions with major lenders, data and technology providers, and mortgage agencies.
It’s hard to pick just one project because we’ve had several interesting engagements recently: for example, our work with Ginnie Mae on their Digital Assurance Program; or the asset sale program that we manage to HUD that has turned over 50% of these vacant properties over to non-profit organizations for affordable housing; or the analytical work we provide to industry participants to help them measure the progress of their ESG investments.
These commitments are helping to make the mortgage industry more efficient and resilient, two goals I pursued as a regulator and continue to focus on as an industry consultant.
HW: What important changes in federal regulation and legislative policy should people pay the most attention to?
FA: As I mentioned, there is a lot of interest and momentum around regulating affordability and inclusion challenges in homeownership. It is a priority at FHFA, FHA, HUD and Ginnie Mae. These agencies are trying to find creative solutions to make housing more affordable and home ownership more feasible.
There is almost a New Deal spirit at work. We are also seeing new market-based initiatives coming from the private sector. One of the nation’s largest lenders, for example, just announced that it is piloting a new program that will provide no-down-payment mortgages with no closing costs to first-time homebuyers in black and Hispanic neighborhoods in five major cities.
HW: How has your experience as a director of OFHEO (now FHFA) influenced your initiatives and leadership at Falcon Capital?
FA: The GSEs and Ginnie Mae have been evangelical in their support of digital lending. Today about 5% of all conforming mortgages are eNotes, and all agencies are on record encouraging lenders to originate more assets digitally. ginnie mae has been accepting eNotes on a pilot basis since the beginning of the year. In June, they expanded their Digital Assurance Program and are now in the process of accepting new applications from electronic issuers, electronic custodians, and sub-services. This was a major milestone in the digitization of government lending, which was a market of roughly $757 billion.
HW: Falcon Capital works regularly with government agencies on program management and regulatory strategy. Is there a project or association that you are particularly proud of?
FA: Lenders see the value in providing their customers with the same type of convenient digital experience they find in other aspects of their lives (eg, banking, shopping, transportation). They also worry that if they don’t provide this expertise, the larger national retail lenders will. That’s why I think these initiatives will continue even in the smaller, more competitive environment the industry is now facing.
Creating digital assets, rather than paper ones, provides greater capital market efficiency and reduces costs and errors. Recent ROI studies have shown that electronic closings and electronic notes can save originators approximately $400 per loan. That’s a big number when you consider that the average originator lost $82 per loan in the second quarter, according to the Mortgage Bankers Association.
This interview was originally published in the October/November issue of HousingWire magazine. To view the full issue, click here.
