October 10, 2019
By Paul Bubny
The recent expansion of Fannie Mae and Freddie Mac’s multifamily lending caps by Mark Calabria, the Federal Housing Finance Agency’s director, made the lending community sit up and take notice. But Willy Walker, CEO of agency lender Walker & Dunlop, put the announcement into perspective.
“It isn’t a game-changer for the market, but it sends a very clear signal that Calabria gives very high priority to multifamily,” Walker told Connect Media.
A keynote speaker at the upcoming Connect National Investment & Finance conference, slated for Oct. 23 in New York City, Walker shared some insights on the dynamics of multifamily acquisitions in recent months. “The large institutions have been extremely active, scouring the country for opportunities to deploy capital,” he said. “This results in very competitive bidding.”
Conversely, smaller investors may be at a disadvantage because they’re not able to find buying opportunities that make sense for them. Walker recently had back-to-back meetings in the same city—one with an institutional borrower eager to make deals in that market, and the other with a smaller investor. The latter, Walker said, “sat there scratching his head and said he couldn’t find any acquisition opportunities in his market.”
The ups and downs of Treasury yields recently have spurred concerns about the potential of a recession in the near term. However, Walker & Dunlop’s latest quarterly report on multifamily noted that an inverted yield curve didn’t necessarily mean a recession was coming.
That’s because, for one thing, “We never had QE1, QE2 and QE3 before,” said Walker. The Federal Reserve’s monetary policies in the aftermath of the Great Recession were unprecedented, and so the recovery didn’t really look like previous recoveries. Accordingly, he said, you can’t look to past history as a predictor that we’ll have a recession in the next six months, year or two years.
Although the slow-growth recovery from the recession was a point of criticism of both the Fed and the previous administration, it also meant that developers didn’t overbuild, pointed out Walker. Also, 10 years after the downturn, lenders have stayed remarkably disciplined.
“We achieved lending volume of $5 billion in the second quarter, and that was with an average loan to value of 65% and debt service coverage ratio of 1.43,” Walker said. A Wall Street conduit didn’t come along and undercut that underwriting with an 80% LTV. Although you’d normally expect to see “stupid loans” as the recession recedes farther into the rear-view mirror, Walker said they’re not happening.
The deal volume Walker & Dunlop amassed in Q2 wasn’t achieved with any one particular size of transaction, said Walker. The company does deals of all sizes, and no one type of transaction has predominated.
What has been a driver of growth for the company has been its ability to expand. Connect Media readers will have seen several reports on this website about Walker & Dunlop’s expansion into new markets over the past few months.
Key to that, Walker said, is the company’s ability to attract lending professionals who are not only “terrific bankers,” but who are also interested in helping to grow the company. It’s an entrepreneurial opportunity that isn’t readily available elsewhere anymore, he added, although until recently it was.
Connect National Investment & Finance is coming to New York on Oct. 23. For more information, or to register, click here.
Connect Opportunity Zones will be presented for the first time on Oct. 23 in New York. For more information, or to register, click here.
For comments, questions or concerns, please contact Paul Bubny