Armando Falcon Likes New MBS Idea

A former GSE regulator is giving a big thumbs up for the Federal Housing Finance Agency's plan to build a new securities platform that will replace the aging platforms Fannie Mae and Freddie Mae are currently operating.

"It makes complete sense," said Armando Falcon, who was chief regulator of the two government-sponsored enterprises from 1999 to 2005.

Why build two platforms and "pay for it twice," Falcon said, when you can build one securities platform and put it in a separate entity.

The former Office of Federal Housing Enterprise Oversight director also likes FHFA acting director Edward DeMarco's plan to transfer the back-office functions of Fannie and Freddie securities businesses to the new entity that will run the securities platform.

Falcon says the entity could also house the GSEs' automated underwriting systems. "Why do we need the redundancy of two AU systems?" he said in an interview.

Congress strengthened GSE oversight in 2008 and created the FHFA to replace OFHEO. The former OFHEO director is now the chairman and chief executive of Falcon Capital Advisors.

Falcon told NMN that the FHFA has "set the stage for the beginning of the end of Fannie and Freddie."

The new entity could evidentially replace Fannie and Freddie, which would make it easier for Congress to enact GSE reform and wind down Fannie and Freddie.

"Maybe this is the path of least resistance to reforming Fannie and Freddie," Falcon said.

Last week, the former OFHEO director spoke at the National Association of Hispanic Real Estate Professionals' conference in Washington. He said Congress is deadlocked on GSE reform and is unlikely to do much in the next two or three years.

"All the action is at the regulatory level" and NAHREP needs to pay attention to what the FHFA is doing.

"We need to ensure this doesn't impair the flow of credit into our communities and to Hispanic families who are trying to buy homes," Falcon said.