The question is when. I think one of the things that as CEO of this great firm I have a lot of confidence in is we don’t have to be in the lab trying to figure out how to design the iPhone 16 to get people to go buy the next generation of technology. We don’t have that problem. We know that we have the bankers and brokers brand and services at Walker & Dunlop that when demand comes back into the market, we will be able to meet that demand. We have the people we have the services. And so really, it’s a matter of keeping the team focused doing every piece of business we can now. But we know as we saw in 2010 and ’11 and ’12 after the GFC when the market heels and those cap rates and interest rates come together to a point where the market starts to transact, we are going to be positioned exceptionally well.
Kyle Joseph: Great. Thanks so much for answering my questions. Really appreciate it.
Operator: Our next question comes from the line of Steve DeLaney with JMP Securities. Your line is open.
Steven DeLaney: Good morning, everyone and Willy, thanks for your clear and candid comments this morning. I think appropriate for the market we’re in. The thing that was most interesting to me was the kind of creative idea that you’re thinking about two new funds that you would raise. I assume with partners, asset management partners, you mentioned Pref and Debt. Could you just comment about those maybe a little more. I’m not sure you’re at the point right now. You can mention who your partners might be, but anything you could add on that and then I have one follow-up related to that. Thank you.
Willy Walker: Yes, Steve. I think you can appreciate because we are in the fundraising mode, I have to be very careful as it relates to quote unquote promoting those funds. And so I can’t really go much deeper into exactly what part of the market they’re focused on. The outline I put into our script was, as you can imagine, heavily scrutinized by our lawyers to make sure that I was in no way promoting the funds. But what I would underscore is this, not speaking specifically to the funds, as I said what we have seen is that our access to deal flow through our banker broker relationships with the market is very attractive from an investor’s perspective. And unlike some of our competitor firms who have incredible brands and the ability to raise volumes much higher than Walker & Dunlop would ever contemplate on the asset management side, all of that deal flow is being brokered into them.
And they are being bid off against other investors, other people with capital. The fact that we have access to the clients makes it so that we can find the deals quicker. And in many instances are not being, if you will, bid off against other capital sources because we’re coming in with what you would deem sort of rescue capital. And so that’s an important piece to the value proposition at Walker & Dunlop.
Steven DeLaney: Interesting. And, you know, Jade and I and others cover a group of 25 commercial mortgage rates, if you can believe it’s that many. And obviously, while they’re not multifamily focused, they probably should have been more. But I think the same characteristics are apply everywhere. What we’re seeing is a kind of a loan to own strategy or a need for these companies, you know, on their five rated five ticks, see ratings rate risk ratings, you know, a lot of fives right and they’ve already put in big reserves to me there’s seems to be this amazing opportunity to step in and actually buy loans with sort of a loan to own strategy. And we’re seeing it. We’re seeing that play out but I don’t sense that it’s really institutionalized yet, but there’s an awful lot of public data, you know, in their decks, they’ve just been reporting in the last few days.
So it just strikes me that there’s this tremendous opportunity for external opportunistic external capital to come into those situations. And heck, if it’s if we’re seeing what we’re seeing just in 25 little commercial mortgage rates, the opportunity with within the commercial banks, you know, has to be multiples of that. So I applaud what you’re doing. The market needs what you and your partners are focused on. I can assure you that.
Willy Walker: The one thing that I would say on that Steve, so that you and jade and others on this call know are thinking about it. We see the exact opportunity that you’re talking about the one thing that I would push for is that the reason we sit so well today is because we haven’t been the type of investor to say let’s either use our own balance sheet or our own capital to go take 100% of the risk on making that bet on that deal that asset that opportunity. And so what investors should expect of Walker & Dunlop is to raise funds with other people’s capital, do co investments to then meet our client needs, and that will drive increased deal flow at Walker & Dunlop, and we’ll create additional asset management fees. But we are not the ones to look at 2024 and say, huh, massive opportunity go all in and take the commensurate risk with that.
It’s not the way we built the Company and we’re not going to go off of that more conservative risk strategy, even though we see exactly the same opportunities you just identified.
Steven DeLaney: Totally understood you’re going to use OPM and earn your fees and get paid for your expertise. Thank you for the color Willy appreciate it.
Operator: [Operator Instructions]. And we’ll go next to Jay McCanless with Wedbush. Please go ahead.
Willy Walker: Jay I think you’re on mute.
Jay McCanless: There we go. That funny little button on phone sorry about that. So my first question is, if in that rate environment range that you talked about Willy. If rates are stable. Does that potentially help HUD origination volume going into next year, make up for some of the the law space you guys haven’t been able to get this year?
Willy Walker: I would hope so Jay. Let me let me dive into that question a little bit deeper. And our HUD origination volumes which have come down quite significantly over the past two years are due to two significant factors. And I want to underscore, we know we are not holding up in that space and we need to, our team knows it we know it. We have lost the market share in the HUD space and we need to gain that market share back. The reason we have lost market share is the first is the reason for a very strong 2021 HUD print was that we were doing a lot of interest rate reduction loans. So as we were in that low-rate environment we were going back to our historic borrowers and we doing those loans with lower interest rates and that drove a lot of volume for 2021 HUD originations.
In both ’21 and ’22 the other large component of our HUD volume was construction loans. We are the largest HUD D4 construction lender in the country. We have the very best HUD D4 construction team in the country. And that was a big component to our HUD volumes in ’21 and ’22. I don’t need to tell you that construction lending has gone through the floor in 2023 due to costs due to rates and due to a sense of oversupply in many of the high growth markets. So what we have is a market in ’23 that dislocated on our two biggest products IRRs and D4s. So we have an exceptional team. What we need to focus on is more of the standard refinancing market which is called 223 Fs. We need to get volume out of 223 F refinancing in HUD. We will see that construction pipeline continue to both hold in place and grow.
