Steve Delaney

Steve Delaney inquired whether Walker & Dunlop's balance sheet, as of year-end 2025, is considered 'clean' regarding write-downs, fair value marks, and litigation, and if past problems are now in the rearview mirror. He also asked about the company's market share positioning with Fannie Mae and Freddie Mac, specifically the potential to advance from the number three position with Freddie Mac.

Answer

Willy Walker (Chairman and CEO) acknowledged the intent to present a clean balance sheet but cautioned about unforeseen issues, while reaffirming diligence and enhanced underwriting. He expressed confidence in the company's ability to maintain its number one position with Fannie Mae and continue gaining market share with Freddie Mac, citing 50% growth in 2025 and the strength of W&D's integrated platform.

Steve Delaney sought confirmation on whether Walker & Dunlop's balance sheet, as of year-end 2025, is considered 'clean' regarding write-downs, fair value marks, and litigation, implying that past problems are now in the rearview mirror. He also asked about Walker & Dunlop's prospects for maintaining and improving its league table positions with Fannie Mae and Freddie Mac in 2026 and beyond.

Answer

Willy Walker, Chairman and CEO, acknowledged the difficulty of absolute certainty but expressed strong confidence in the scaled portfolio and underwriting, highlighting proactive work and enhanced underwriting processes. He emphasized the company's serious commitment to league table positions, noting over 50% growth with Freddie Mac in 2025 and overall growth with Fannie Mae, attributing potential future gains to the combined strength of their financing, sales, research, and appraisal platforms, and the expanded GSE lending caps for 2026.

Steve Delaney from Citizens JMP Securities asked about FBRT's capital allocation towards direct real estate equity investments, questioning if the current investment REO was a one-off or indicative of a future strategy. He also inquired about the transparency of NewPoint's agency business operations, specifically regarding its origination, sale, and servicing components.

Answer

CEO Michael Comparato clarified that FBRT has multiple equity investments, totaling $400 million-$500 million in gross assets, and expects a slightly higher allocation to select equity investments (5-10%) in the coming years, though FBRT will remain primarily a debt shop. CFO Jerome Baglien added that the supplemental deck and 10-K will provide detailed segment information for NewPoint, including volume, income components (servicing, gain on sale), and cost structure, along with 2026 guidance.

Steve Delaney from Citizens JMP Securities asked about FBRT's capital allocation towards direct real estate equity investments, questioning if the current investment REO is an isolated instance or indicative of a growing strategy. He also inquired about the transparency of NewPoint's agency business operations, specifically if detailed segment information on origination, sale, and servicing to Freddie and Fannie would be available.

Answer

CEO Michael Comparato clarified that FBRT has multiple equity investments, including two large joint ventures from 2025, totaling $400-$500 million in gross assets. He stated that while FBRT remains primarily a debt shop, a slightly higher allocation (potentially 5-10% in a few years) to select equity investments is expected for growth, but not to the extent of becoming an equity REIT. CFO Jerome Baglien confirmed that the supplemental deck and upcoming 10-K would provide detailed segment information for NewPoint's agency business, including volume, income components (servicing, gain on sale), and cost structure, along with 2026 guidance.

Steve Delaney of Citizens JMP Securities, LLC asked for confirmation that the recent 'deluge of liquidity' was primarily in the bridge lending business and inquired about the quality of current originations compared to the 2021-2022 vintages.

Answer

Michael Comparato, President, clarified that the surge in liquidity is widespread across all credit sectors, especially in securitized products like CRE CLOs. He elaborated that current originations are of significantly higher quality, focusing on newer vintage assets needing a 'bridge of time' rather than heavy transitional business plans. He also stated that current credit metrics like debt yield and LTV are markedly better than those from three to five years ago.

Steve Delaney from Citizens JMP Securities, LLC sought color on the source of the "deluge of liquidity" in the credit markets and asked for a comparison of the credit quality of today's loan originations versus the 2021-2022 vintage.

Answer

Michael Comparato, President, attributed the liquidity to investors feeling the market is near a bottom. He contrasted current originations with the 2021-2022 vintage, noting today's loans are for higher-quality, newer multifamily assets requiring a "bridge of time" for lease-up rather than heavy transitional business plans. He stated that both asset quality and credit metrics like debt yield and LTV are markedly better now.

Steve Delaney asked about Ladder Capital's underwriting discipline for bridge loans, particularly in light of significant industry losses over the past three to five years. He sought insights into past underwriting mistakes and how Ladder plans to avoid similar 'carnage' moving forward.

Answer

Brian Harris, CEO of Ladder Capital Corp, attributed past industry losses to a combination of low cap rates, zero interest rates, high liquidity, and rapidly rising interest rates, especially in apartment buildings and 'gateway cities.' He highlighted Ladder's historical avoidance of high-leverage deals and preference for 'flyover cities.' Mr. Harris emphasized increased caution when refinancing competitor bridge loans and in large cities with unionized workforces and crime, acknowledging that while Ladder's losses were de minimis compared to competitors, they were still unacceptably high by their own models.

Steve Delaney questioned Ladder Capital's underwriting discipline for bridge loans, given the significant losses seen across the commercial mortgage REIT industry over the past 3-5 years, and what measures Ladder would take to avoid similar issues.

Answer

Brian Harris (CEO, Ladder Capital Corp) attributed past industry losses to a combination of low cap rates, zero interest rates, high liquidity, and rapidly rising interest rates, alongside the 'work from home' trend and overinvestment in 'gateway cities.' He acknowledged Ladder's losses, though 'de minimis' compared to competitors, were higher than internal models. Harris identified key mistakes as refinancing competitor bridge loans and being cautious about large cities with unionized workforces and high crime. He emphasized Ladder's focus on 'flyover cities' and newer properties, avoiding high-leverage financing requests.

Steve Delaney asked if improving the Return on Equity (ROE) to the 9%-10% range, in a prudent manner, was part of Ladder Capital's vision for the next one to two years, and if the current strategy would necessarily lead to a higher ROE.

Answer

CEO Brian Harris affirmed that improving ROE is a key objective. He outlined the strategy: writing more loans, utilizing cash liquidity, and then selling down securities to reinvest in higher-yielding loans. He noted that with anticipated Fed rate cuts, Ladder's cost of funds (especially the revolver at SOFR + 125) is expected to decrease, while loan rates have recently increased. He projected adding $1 billion to $2 billion of net assets and picking up 3%-4% profit margin by replacing 5.5% yielding securities with 8.5% yielding loans, which he believes will significantly boost dividend, ROE, and earnings.

Steve Delaney asked about the projected growth of Ladder Capital Corp's $1.9 billion loan portfolio over the next year, inquiring about the potential size it could reach given the current capital base and increased activity. He also questioned whether improving the 8.3% ROE to the 9-10% range was part of the company's vision for the next one to two years and if the current strategy would achieve this.

Answer

CEO Brian Harris stated expectations for the loan portfolio to grow by over $1 billion, aiming to return to a size of around $3.4 billion, driven by strong origination activity and a pipeline of over $500 million in applications. He confirmed that improving ROE is a key objective, planning to achieve this by writing more loans, utilizing cash, selling securities, and benefiting from lower cost of funds (e.g., revolver at SOFR+125 with anticipated Fed rate cuts). Mr. Harris projected a 3-4% increase in profit margin by reinvesting 5.5% securities into 8.5% loans, emphasizing stable credit conditions.

Steve Delaney inquired about the impact of interest rates on Redwood Trust's securitized prime jumbo portfolio, specifically regarding the WAC and CPR dynamics, and the current range for 30-year fixed prime jumbo loans. He also asked if the recent refi pickup was driven by home price appreciation (HPA) or cash-out needs.

Answer

CEO Chris Abate noted that a third of the quarter's volume was refi-related, but most homeowners are out of the money. He stated that the portfolio is trending towards current coupon, and the business is primarily focused on mortgage banking rather than portfolio investing. Chris Abate mentioned current prime jumbo rates were around 6.25%, with Aspire rates about 100 basis points higher. He confirmed seeing some HPA-driven and cash-out refi business, attributing the broader refi pickup to increased capacity and technology allowing homeowners to refi with smaller rate differentials.

Steve Delaney of Citizens JMP Securities, LLC asked for details on the 15 new loan officers hired at Lima One, including their geographic focus, product specialty, and the resulting total number of producers.

Answer

President & CIO Bryan Wulfsohn responded that the new hires are high-quality additions from competitors, with a focus on expanding in the West and Midwest. He noted that it takes a few months for new hires to ramp up but expects aggressive growth in the second half of the year. The team is now approaching 50 producers with a goal of growing to 80.