Welcome to Walker & Dunlop’s Third Quarter 2013 Earnings Conference Call and Webcast. Hosting the call today from Walker & Dunlop is Willy Walker, Chief Executive Officer. He’s joined by Steve Theobald, Chief Financial Officer; and Claire Harvey, Vice President of Investor Relations. Today’s call is being recorded and will be available for replay beginning at 10:00 AM Eastern Standard Time. The dial-in number for the replay is 800-723-0528. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. (Operator Instructions) It is now my pleasure to turn the floor over to Claire Harvey.

Thanks, Steve. Good morning, everyone. Thank you for joining the Walker & Dunlop third quarter 2013 earnings call. I have with me this morning our Chairman and CEO, Willy Walker; and our CFO, Steve Theobald. This call is being webcast live on our website and a recording will be available later this morning. Both our earnings press release and website provide details on accessing the archived call. This morning, we posted our earnings release and presentation to the Investor Relations section of our website, www.walkerdunlop.com. These slides serve as a reference point for several of what Willy and Steve will touch on this morning. So participants who are interested in following along should pull those up and have them available. Please also note that we may reference certain non-GAAP financial metrics such as adjusted net income, adjusted earnings per diluted share, adjusted operating margin, adjusted income from operations and adjusted total expenses during the course of this call. Please refer to the earnings release and presentation posted on our website for reconciliations of the GAAP and non-GAAP financial metrics and related explanation. Investors are urged to carefully read the forward-looking statements language in our earnings release. Statements made on this call, which are not historical facts, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, including statements regarding future financial operating results, involve risks, uncertainties and contingencies, many of which are beyond the control of Walker & Dunlop and which may cause actual results to differ materially from anticipated results. Walker & Dunlop is under no obligation to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise. We expressly disclaim any obligation to do so. More detailed information about risk factors can be found in our reports on file with the SEC. I will now turn the call over to Willy. Willy?

Thank you, Claire. And good morning to everyone joining us on the call today. I’d like to start my comments focusing on what has happened in 2013 from a regulatory and market perspective to give investors in Walker & Dunlop a good sense of what we’ve experienced and how we’ve competed in a highly challenging environment. I will then highlight a number of Walker & Dunlop’s recent business development initiatives that have started to benefit our results. I will then turn the call over to Steve to discuss our Q3 financial performance. And I then will finish the call by discussing what we see ahead of us and how Walker & Dunlop will continue to compete and grow going forward. When the Federal Housing Finance Agency, FHFA, came out in March with their arbitrary 10% reduction to Fannie Mae and Freddie Mac’s 2013 multifamily lending volumes, we expressed concern with the regulators’ actions, but did not think a 10% reduction would dramatically impact the GSEs. We were wrong. As we discussed in our Q2 earnings call, the 10% reduction required the agencies to start allocating capital and picking deals for reasons other than just being great real estate debt investments. In the midst of Fannie and Freddie trying to determine which deals to do and not do, interest rates shot up over 100 basis points and put securitized lenders such as Fannie and Freddie at a pricing disadvantage to balance sheet lenders who are not selling into an investor community that needed higher spreads in an increasing rate environment. Notwithstanding the turmoil, Walker & Dunlop originated $2.6 billion of loans in Q2, right down the middle of our guidance range. But we didn’t do as much business with Fannie Mae as in the past, so margins contracted, as did earnings…

Thank you, Willy, and good morning, everyone. I will provide some additional context around our third quarter financial results, discuss the performance of our servicing portfolio in greater depth and explain the details of the cost reductions that Willy mentioned. Net income for the third quarter was $8.1 million or $0.23 per share. Adjusted net income, which excludes selected expenses relating to the acquisition of CWCapital, was $8.7 million or $0.25 per share. Operating margin for the quarter was 17% and adjusted operating margin was 19%. This compares to adjusted net income of $14.3 million or $0.56 per share and adjusted operating margin of 34% in the third quarter of 2012. Net income, earnings per share and operating margin on a GAAP basis for the third quarter of 2012 were $7.1 million, $0.28 and 17% respectively. Total origination volume of $1.8 billion was down 19% from Q3 2012 and below our initial guidance of $2 billion to $2.5 billion. As Willy mentioned, this quarter’s origination volumes with our core agency partners were negatively impacted by volatility in interest rates, a decline in the market presence of Fannie and Freddie, and a lack of sufficient HUD commitment authority. On the positive side, we saw great execution and growth from our Capital Markets team. This quarter, brokered originations were the largest part of volume at 35% of total loans originated. We continue to see strong investor demand for commercial real estate. And this, combined with constrained agency originations, likely means that our brokered originations will continue to be a large and growing share of our overall volumes. We expect that our fourth quarter total originations will be between $1.5 billion and $3 billion. As you will see from the table included in our press release, we have separately disclosed the amount of…

Thank you, Steve. Let’s look forward to year-end 2013 and what we are planning for in 2014. I will be the first to admit that our crystal ball has been a bit foggy at best for most of 2013. We clearly did not expect the regulatory changes or market conditions that have made this year so challenging. But our team has done a great job of selling and managing through it. We know that the commercial real estate finance industry has a refinancing boom ahead of it between 2015 and 2017. Hundreds of billions of dollars of commercial mortgages come due in those years and Walker & Dunlop will use its scale, talented origination and underwriting platform and longstanding client relationships to do as much business as possible in what would be a very robust market. So, what happens in 2014 before the refinancing wave hit? First, we do not know whether FHFA will reduce the GSEs multifamily volumes again. But FHFA continues talking about future reductions and potential lending limits on certain types of multifamily assets. These comments and actions by FHFA do not make sense as there is widespread support for the GSE’s multifamily businesses by both Republicans and Democrats on the Senate Banking Committee, where the most rigorous analysis and debate on the future of the GSEs is taking place. As well, FHFA recently asked for industry input on continued reductions in Fannie and Freddie’s multifamily lending businesses. And 91% of respondents said the businesses were sound and should not be further reduced. And most puzzling, FHFA’s own 2013 through 2017 strategic plan calls for four major changes to Fannie and Freddie’s lending operations, all of which the GSEs multifamily businesses comply with today. So even though legislators, industry participants and their own strategic plan don’t call…

Floor is now open for questions. (Operator Instructions) And our first question is from Whitney Stevenson from JMP Securities. Your line is open. Whitney D. Stevenson – JMP Securities LLC: Hi, there, everyone. Good morning. Thank you for taking my questions. I’m wondering if you can talk a little bit about looking ahead to when we get to the bulk of the refinancing wave in 2016 and 2017 about what your goal and mix is from the new lending initiatives you’re rolling out?

Whitney, a little tough to, if you will, comment, as it relates to what percentage of all that we like to do. As you know, 2007, there was $230 billion of CMBS loans originated in 2007. The great majority of that will be terming in 2017. The components in 2015, 2016 and 2017 that are the greatest from a refinancing standpoint are those CMBS loans that were done in 2005, 2006 and 2007. So one of the most exciting parts of our CMBS platform is that many of those loans may or may not be, if you will, agency or Fannie Mae, Freddie Mac type loans or the borrowers actually may or may not be typical agency borrowers. And so, by launching the CMBS platform, I believe we are going to have a fantastic opportunity to participate in refinancing a solid percentage of those loans that were previously in CMBS pools that will be up for refinancing. Whitney D. Stevenson – JMP Securities LLC: Okay. And then, I think that Steve mentioned the mid-20% margin goal for this year. Is there anything that you’re foreseeing in the mix in 2014 that we should think about when looking at a run rate for the margin?

I mean I don’t think so, Whitney. I’d put forth that you’ve seen our Capital Markets business grow significantly and be 30% of originations in Q2 and 35% of originations in Q3. But as I hope I was explicit in saying in my comments, the strategy here is to – you’ve got to get access to the deal flow. And we have done that successfully by hiring new originators in our Capital Markets group and growing that business significantly. But the strategy is to make sure that we’re creating proprietary capital sources behind it, so that our revenues and our margins are not that of a pure brokerage firm. And they are the revenues and margins of a lender. And so as we move down this path, I think we’ve been very successful at adding the access to originations by growing our Capital Markets business. And as we have shown in Q3 with the launching of our large loan bridge program with two large intuitional investors and now in Q4 with the announcement of our CMBS platform in early 2014, we are creating those proprietary sources of capital, which should allow us to maintain our margins in that mid 20% range, which Steve talked about. Whitney D. Stevenson – JMP Securities LLC: Okay, great. Thank you.

Our next question comes from Brandon Dobell from William Blair. Your line is open. Brandon B. Dobell – William Blair & Co. LLC: Thanks. Maybe a quick, I guess, presentation question. When you guys start generating deals out of the CMBS and high yield initiatives, what’s the presentation of those going to be on the P&L and the balance sheet? I just want to make sure we have a better idea of how that’s going to look, what we’re going to see to gauge – to gauge your progress there?

Yeah. Brandon, this is Steve. I’ll jump in on that one. I think from the perspective of any loan that our current originators are originating into the CMBS platform, those would roll through our P&L probably largely like a Capital Markets execution would look like. Brandon B. Dobell – William Blair & Co. LLC: Okay.

There will be originators that are embedded into the joint venture that are originating directly and only for the JV. The revenue that we earn off that will be our 20% of the profits of the venture and that will likely roll through other income at this point in time. Brandon B. Dobell – William Blair & Co. LLC: Got it, okay. And then turning to brokered loans, nice progress the last couple quarters in terms of proportionate origination. As we think about the long-term economics of that business, recognizing it’s probably going to be a little lower margin than just what the kind of current P&L would look like. But I guess I’m more curious about the service intensity of that business. i.e., can you do good volume without having to have a lot of people, i.e., you kind of upset your personal ratios? And then from a servicing perspective, how do we think about the impact as that part of the portfolio grows on your overall servicing fees, especially as you look out to the next three or four years?

So the – Brandon, as you very well know from your coverage of other competitors in this space, the Capital Markets, as we call it, or the brokerage businesses, as others call it, is a lower margin business due to both the fees that you’re earning and then also not taking risk on the loans that you originate and then also not booking MSRs and having lower servicing fees. Brandon B. Dobell – William Blair & Co. LLC: Right.

On the front-end, we’ll manage that as we have up until now, which is that that execution doesn’t require huge infrastructure. Obviously, it doesn’t require underwriters, it doesn’t require closers and requires far less, if you will, overhead internally to originate a loan. So from the front-end of it, the economics stay pretty consistent, if you will, to where we’ve been up until now, which is sort of, as the comps to us will show you, sort of, a mid-to-low teen return business. As it relates to the servicing side of it, you ask a very good question, because one of the beauties of our existing servicing portfolio is that because the bulk of it is with two lenders, with Fannie Mae and Freddie Mac. we have standardized documents and standardized servicing requirements on us from those two lenders. When you broaden out the capital sources that you are lending for, you then broaden, if you will, the variability o r the discrepancy between various lending – lender servicing standards. And so it becomes a far more complex operation. We have been servicing loans for life insurance companies for decades, as well as CMBS lenders for decades. And so we’re pretty expert at that. But you raise a good question, which is just the servicing is lower from a revenue standpoint and then it’s also higher intensity from a management standpoint. And so it’s very important that you scale with a certain number of lenders. But if you grow that servicing portfolio with every single lender out on the face of the planet, you’re going to have a hard time creating the margin you need to. Brandon B. Dobell – William Blair & Co. LLC: Got it. Okay. And then, Willy, just touching on your comments around that $70 billion to $80 billion bucket that could be out there for next year, sounds like you have a pretty decent amount of confidence in the gross numbers. What’s your confidence level in how those numbers, I guess match up with what your historical property type strengths have been? i.e., is Fannie going to say we’re just not going to originate into that particular geography or properties over a certain dollar amount or something like that that would skew that $70 billion to $80 billion either towards you or away from you in terms of your strength for origination?

It’s an extremely good question, Brandon, and I wish I knew better how to answer it. I will say this. There are a couple things here. First is, that, as we all know, originators have client bases that go through cycles of refinancing needs. And so, as much as our origination volumes have been off this year, due to a lot of external forces, there’s also, if you will, some client mix in there of clients – no way to say that we haven’t lost a lot of business because we’ve lost a ton of business this year. And it has been very hard to lose that business in a year when traditionally we would have won that business if Fannie and Freddie had been more active in the markets. But with that said, first of all, there is the cyclicality of client demand. The second thing is that the regulator is clearly looking at whether they ought to restrict the agencies in lending in various product types. Most specifically, the discussion inside the regulator right now is should they limit the amount of lending that Fannie and Freddie do on high end assets or as we call them brass and glass. And there are two sides to that. One, we have spoken extensively with both legislators on Capitol Hill, as well as with the regulators saying any time you restrict to one asset class or try and put caps on it, you, generally speaking, distort the market. And that they probably want to allow the agencies to continue to manage their business. And if they want to cap the aggregate volume of business that’s better than trying to cap any one type of deal or one type of asset class. If they were to do that, that is unfortunate,…

It should be limited to Q4, Brandon. Brandon B. Dobell – William Blair & Co. LLC: Okay. I appreciate it. Thanks, guys.

Yeah.

Thank you.

(Operator Instructions) Our next question comes from Charles Nabhan from Wells Fargo. Your line is open. Chuck J. Nabhan – Wells Fargo Securities LLC: Good morning. Thanks for taking my call. Through your conversations with the GSEs, do you get the sense that they will be reducing some of their originator relationships? And if so, do you anticipate any fallout or opportunity for the company as a result of that dislocation?

So Charles, we would – we’d love to see it. I’m not sure whether we will. There are currently around 25 participants in both the Fannie Mae DUS program and the Freddie Mac Seller/Servicer program. I’ve spoken to the leaders o f both of those programs saying, isn’t it time to focus your time, attention and capital on your largest partners and not have to focus on, if you will, lenders number 20 through 25? They understand the discussion and understand, if you will, the reasons for it, but it’s a delicate subject with them. And we’re waiting to see if they do anything along those lines or not. As it relates to their capital and how much they are giving to each lender, one of the things that we were quite concerned with was that they would manage our volumes in 2013 to a 2012 number, minus 10%. And what we have seen actually is that our numbers with Freddie Mac have gone up. Our numbers with Fannie Mae are down through three quarters about 10% from where we were a year ago. But we have been assured by both of them that they are not managing us to any specific number for the year. And so it’s a little difficult for us to tell right now. The only other thing I would say is that from a competitive positioning standpoint, they have no t published any numbers on it, but it is our sense that we are still neck and neck as far as being the largest Fannie Mae DUS lender with one or two other lenders and that we are firmly in the top five with Freddie Mac. And so even though our numbers have gone down and missed our expectations, from a competitive landscape standpoint, our competition has also had similar reductions in their volumes. Chuck J. Nabhan – Wells Fargo Securities LLC: Right. And when we look at your guidance for the fourth quarter of $1.5 billion to $3 billion, that’s quite a wide range and I understand there is a bit of uncertainty and you’ve touched on some of the factors driving that uncertainty. But could you give us a little more color on the factors? I know there’s some seasonality in the fourth quarter, but how should we think about that range?

So as I said in the call, we gave guidance on Q3 having looked at our pipeline, looking at the competitive landscape and having heard from the GSEs that they were staying in the markets and would continue to provide capital. And in a very short period of time after making – establishing our Q3 guidance, the market moved on us in a dramatic way. And the agencies really hit the brakes. And as you well know, we missed our guidance range. And we’ve been very, very good historically at establishing guidance and being able to meet that guidance. So what we have done on this quarter is, we’ve established a guidance range that we are – as you yourself said, it’s a wide guidance range and we are going to come in that guidance range. So it is – it’s nothing other than us sitting there, looking at the landscape and saying, we’ve got a great team, we’ve got a great pipeline and we are working tirelessly every single day to get as much business done as we possibly can. But the actions by Fannie and Freddie in Q3 and also the competiveness of the marketplace – I will not only say that Fannie and Freddie hit the brakes hard in Q3, which surprised us how hard they hit the brakes, but I would also say as we said in our prepared remarks that the balance sheet lenders, particularly, banks and life insurance companies, really got competitive in Q3. And there seems to be right now an insatiable appetite on the part of balance sheet lenders for not only multifamily loans, but commercial real estate loans across the board. And how long they continue to compete at the levels they are competing at, we’re out there every single day and we’re seeing the agencies be very competitive day in and day out right now, but it’s a highly competitive environment as we said in our prepared statements. Chuck J. Nabhan – Wells Fargo Securities LLC: Okay. Thank you for taking my call. I appreciate the color.

Yes.

We have no further questions at this time. I’d like to turn the floor back over to Mr. Willy Walker for any additional or closing remarks.

One thing that somebody just mentioned to me was that in my comment on Fannie and Freddie, we are up from a ranking standpoint on Freddie Mac year-to-date as far as where we believe we are in the rankings, but our aggregate volumes at Freddie Mac are down year-to-date. So I just didn’t want to misspeak there. I obviously did by saying that we’re up with Freddie, we’re up in the rankings with Freddie, but our aggregate volumes are down. I would just put forth that Q3 was a quarter in which we worked extremely hard to meet both our internal expectations as well as external expectations. The market was a challenging one. And we are now focused on Q4 and finishing the year very strong and heading into 2014, where we see a lot of opportunity for our company. And so thank you, everyone, for joining us this morning for the call and have a great day.

Thank you. This does conclude today’s conference call. Please disconnect your lines at this time and have a wonderful day.