Welcome to Walker & Dunlop's Second Quarter 2014 Earnings Conference Call and Webcast. Hosting the call today from Walker & Dunlop is Willy Walker, Chairman and CEO. He is 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 AM Eastern Standard Time. The dial-in number for the replay is 1800-839-1198. 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, Leo. Good morning, everyone and thank you for joining the Walker & Dunlop second quarter 2014 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 our 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 some of what Willy and Steve will touch on this morning. Please also note that we may reference certain non-GAAP financial metrics such as adjusted net income, adjusted diluted earnings per share, adjusted operating margin, adjusted EBITDA and adjusted total expenses during the course of this call. Please refer to the earnings release and presentation posted on our website for reconciliation 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 include 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 the 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 SEC. With that, I will now turn the call over to Willy.

Thank you, Claire. And thank you everyone for joining us this morning. The lending landscape for our business is dramatically different today than it was a year ago. FHFA 2014 GSE scorecard was released in May and GSEs multifamily businesses are back. The personnel at Fannie and Freddie are excited and focused on winning business and Walker & Dunlop's size and scale with the GSE is paying dividend. Long-term interest rates have backed up ending Q2 at 2.53% and currently at 2.51%. This rallying rate has once again made long-term fixed rate financing exceedingly attractive to borrowers. And even though 2014 commercial loan maturities are down 23% from last year, Walker & Dunlop is competed successfully to originate $4 billion in loans in the first half of 2014, down only 8% from last year. With the recent launch of our CMBS platform, we continue to expansion our capital markets group, the fantastic growth in on balance sheet lending we've seen and our leadership position with the GSEs', we feel very well positioned for the rest of 2014, leading into 2015 when there is 73% increase in commercial loan refinancing volumes. The GSEs' multifamily financing activity dropped dramatically in the first half of 2014 due to several factors. First, both Fannie and Freddie ran hard to hit their lending caps at the end of 2013 and took delivery at every loan they could, providing no spillover activity to start 2014. Second, GSE refinancing volume this year is at the lowest point since the financial crisis. Third, the 2014 FHFA score card was not released until early May keeping both Fannie and Freddie in the state of wait and see. This all resulted in Fannie Mae's multifamily origination falling from $15.9 billion in the first six months of 2013 to $8.2 billion…

Thanks, Willy. And good morning, everyone. The second quarter of 2014 marks my fifth quarter as the CFO here at Walker & Dunlop. And I've never been more excited about where our company is today and how we are positioned for tomorrow. Despite the challenges of last year, we've remained focused on creating a platform that is able to meet our customers' borrowing need while delivering solid financial results in any competitive environment. Now happens to be an environment in which our long standing GSE partners are once again competing aggressively for business. And while this has clear benefit to us today as can be seen in our Q2 results, it does not change our focus on continuing to invest and broadening our platform and positioning ourselves to take advantage of the $0.5 Trillion refinance opportunity that lie ahead. With that let me go through our financial results for the quarter in a bit more detail. Net income for the second quarter was $12.9 million or $0.40 per diluted share compared to $14.5 million or $0.42 per diluted share and $0.44 per adjusted dilute share for the second quarter of 2013. Adjusted EBITDA was $20.9 million, a 50% increase from the $14 million we reported for the second quarter of 2013. Operating margin for the second quarter improved to 25% after being in the high teens and low 20s for the last three quarters. As illustrated on Slide 7, total origination were $2.4 billion in the second quarter, down 7% from second quarter of last year. The second quarter this year was almost the complete opposite of last year. It started quietly and ramped very quickly with Fannie Mae and Freddie Mac competing heavily for deals. Our originations with Fannie Mae and Freddie Mac were up 12% over the second…

Thank you, Steve. A year ago when it was evident that our two largest business lines were going to be challenged to grow, I hit the road and started a concentrated effort to help sell Walker & Dunlop's financing solutions, both new and old. I logged over a 100,000 miles net with over 100 clients and outwork on billions of dollars in deals. From hundreds of client meetings I have a pretty good sense of what the market wants and what is making Walker & Dunlop win. At a time when capital is abundant and deal supply is limited, real estate owners and developers want deal flow. Many of the larger real estate developers have shied away from the acquisitions market and focused on developing new assets. While owner operators without development capabilities are competing furiously for stabilized and non-stabilized assets. Reaching out Walker & Dunlop's target market given their direct access to bank financing for construction loans and unsecured credit facilities. However, private developers of all shapes and sizes come Walker & Dunlop to secure bank or life insurance company financing for construction loans as well as permanent financing, once the development is complete. In a stabilized acquisition space, it is a food fight to win deals and therefore certainty of execution and timing from underwriting to rate lock is hugely important. Walker & Dunlop is differentiating itself along these lines with $172 million in Q2 going from issuing an application to locking the interest rate in 47 hours. We are also doing more acquisition financing this year, growing the percentage of financing for acquisition from 20% of total origination during the first six months of 2013 to 28% this year. This data point is extremely rewarding as two of our largest competitors HFF and CBRE, both have scaled…

(Operator Instructions) Thank you. Our first question is coming from Bose George, KBW.

Hi, everyone, good morning. Actually the first question is on the outlook for the GSE market share, obviously did an impressive job continue to grow that. Just curious how you think that could trend?

Bose, as you can see from the slide both the Fannie and Freddie market share have grown significantly and consistently over the past several years. I honestly -- I think we are seeing us if you will standing as the largest Fannie Mae DUS lender and third largest Freddie Mac Seller\Servicer, really positioned us very, very well with clients. That's stay when expertise and what we are doing for clients is showing its value every single day. So I honestly I have now idea, can't project out but what I would say is as you probably know CBRE is the largest Freddie Mac Seller\ Servicer and is consistently had over 20% market share. And as I said in the call we are going to continue to chip away at Freddie's position as the largest Freddie Seller\ Servicer and work hard to maintain our status as the largest Fannie Mae DUS lender. I don't think there is any cat if you will but it's a highly competitive market. As you know there are about 25 DUS lenders and about 25 Seller\Servicers and so it's hard for me to say we'll have 18.5% market share or 20% market share that will fall back to 15%, quite honestly don't know. But we feel very good about where we are and how we are competing today to win agency execution.

Okay, great, that makes sense. If you want to switch to the comments you guys made on some-- seeing some compression on margins on the larger loans. I just wanted to get an idea what kind of magnitude that was?

I mean you gave the actual numbers on what we are seeing?

Right.

I think it was on the mortgage servicing right I think most of the compression was from the larger loans has been a little bit of compression in the sub $20 million market but not nearly as much. And then I think the other dynamic of this is generally large loans in particularly really large loans where we don't have full risk sharing have lower servicing rates anyway. And so to the extent we do more a larger dollar not full risk share origination that's going to also cause compression in the mortgage servicing.

Our next question comes from Jason Stewart of Compass Point.

Hi, this is actually [Amy Jitan] filling in for Jason. But if you go back to the servicing fee compression question just one more time and maybe I can ask it a little bit different but from an ROE perspective for larger deal, does the size of the deal offset to lower fee, once lower costs are factored in?

So Amy I would put the forward following. We are very focused on earning servicing fees on large transactions that, a; are paying us for our risks and, b; paying us for the job we do and servicing the actual loan. And so as a result of that we constantly monitor if you will when we are getting paid for the risk and we are not. I would also say to you that as we look at that, one of the most exciting pieces to it particularly in Q2 was that we actually this year versus Q2 of last year had the ability to win deals. A year ago fee compression and whether we will getting paid enough on our servicing fee, quite honestly was not even a debate because we weren't winning the deals. The agencies were pulling back and not aggressively pricing to be able to win the deals. And so as we get into larger transactions as Steve outlined on the call, a; we are thrilled to be winning them and b; we are very much making plenty of money from a servicing standpoint to be paid both for our risk as well as our cost of servicing a loan. But the entire, if you will, market place not just Walker & Dunlop but across the lending landscape, everybody is seeing net interest margin come down and it's -- we are not, if you will, outside of that in the sense that to win deals that are having multiple bidders on them, you are having to sharpen your pencils, driving to win where you can and we are seeing some fee compression on the larger deals.

Okay. So it sounds like lower expenses are factoring into the equation but at the same time ROE might becoming like coming down across the industry in general for competitor as well. Is that a fair conclusion?

Well, so Amy what you will see is following. If you look at the cost reduction that we put into platform back in November of 2013, we scaled ourselves down and we are operating with that human resource base that we scale down to at that time. As origination volumes start to ramp back up we are watching our hiring very closely. What you will get at some point as origination volumes expand is a place where we get real economies a scale particularly if we continue to do larger deals that don't require more human resources to underwrite them. So you are going to get the economies of scale at some point if you continue to do larger deals. The issue with it is that as with any enterprise that is on a growth trajectory, you are going to figure out what that right point is from starting stand point. So if you look at on a deal by deal basis you will likely see fee compression because that $100 million financing is not earning the same servicing fee they earned two years ago. So on a deal by deal basis you will see some compression there. But we should be able to see and as you saw in our Q2 numbers, we should be able to get some margin expansion across the platform if we get real economies scale as origination volumes grow.

Okay, great, thank you. And just one more follow up. It looks like Freddie interim loan portfolio repayment activity picked up this quarter. So that pick up in repayment activity increased or impact the other income line item at all.

No. So what I mentioned Amy is prepayment fees increase. So if you look at historically repayment experience we've had over the last six quarters has been relatively consistent. What changed is last year a lot of our prepayments were in the HUD portfolio for which we don't receive a prepayment fee. And this year the prepayments have been more in the Fannie and Freddie portfolios and we do receive a fee in that-- in our case those fees have offset the impairment in the mortgage servicing right that we have also recognized.

Okay, great, thanks. And then just to get a feel for the -- can you give us an idea of what the weighted average life for the loan that they repaid and then what the average age, weighted average life is for the remaining loans in that portfolio.

Yes. The loans for -- that have been generated in prepayment fees, a lot of our primary servicing portfolio not out being loan portfolio, so in the main servicing portfolio, our $40 billion portfolio, the amount of loans have paid off early have not impacted the growth in that portfolio nor it has changed the average servicing fees or weighted average life of those assets. They are still at 10 years and 24 basis points in average fee. On the ILP loans, we expect actually a fair amount of turnover in that portfolio which designed to be such because those are generally two year, outside two years loan. And our expectation is the average life is only going to be probably 18 months duration. We have designed that portfolio to be able to do the permanent financing on those assets and we did a 100% of the permanent take out which means all of the $58 million that paid off in that portfolio in the second quarter we either placed with Fannie, Freddie or HUD.

Our next question comes from Brandon Dobell of William Blair. Brandon Dobell --William Blair & Company : Thanks. Maybe some color on where your-- this called producer or headcounts stand now? Either on a year-on-year basis maybe compared to where you finished 2013 at and how should we think about the -- I guess the organic growth in that headcount for the balance of this year?

Brandon, we are currently at 65 and that's up I believe from 61 at the end of 2013. So net 4 add and it's -- we are out in the market place as all of our competitors adding, trying to add the very best origination talent. And it's -- I think as we mentioned in the script, the ability for us the year bring on 14 or acquire firms is something that we have been very focused on. And we will continue to be focused on. Brandon Dobell --William Blair & Company : That's good segway into the -- your comments towards the end, they really about non-multifamily properties. Maybe a little bit color on timing and strategy, is that going to be an organic effort? Is there a particular I guess mode of operation you plan to take, meeting at geography, you are already really comfortable in, multifamily side or the particular set of clients, and maybe have assets or money and go for asset classes so you can cross sell your way into dealing with their office or retail properties. I guess just a little more color on strategy and timing to get into non-multifamily that will be helpful.

Sure. So, Brandon, as you well know two years ago before we launched our balance sheet lending program and before we got into CMBS space, the only risk we took from the lending standpoint was on our Fannie Mae DUS business and as much as we took credit risk on that, I believe that many people sat there and said, they understand the GSE business but as a broad real estate lending platform, they are pretty focused just in the GSE space and just --they just take risk in the Fannie Mae DUS base. Two years later after launching both our balance sheet lending as well as the CMBS platform, we now are much broader, more diversified platform that is underwriting assets both for our balance sheet as well as for CMBS execution. I think that opens the opportunity for us to and raise capital from third parties or use our balance sheet to lend on non-multi asset. The other piece that I would say from a market color commentary standpoint is that when I go out to meet with clients and we are pitching our capital markets execution, the differentiator there is long term relationships and the capabilities of our finance people in accessing capital, underwriting the deals and finding the appropriate deal for the client. But to be perfectly blunt about it, it is not nearly as compelling a story as when we try and sell our multifamily execution where we are the largest Fannie Mae DUS lender, third largest Freddie Mac Seller\ Servicers and are doing things for our clients that nobody else can do. And as a result of that we are very focused on trying to create similar type of differentiators for other asset classes. So whether that be hospitality, office, retail, potential industrial. Those asset classes as well have huge r refinancing volumes 2015, 2016 and 2017. And as much as we have a very, very established brand reputation and execution capability in multifamily. And there is lots of opportunity for us to expand in other asset classes. So with the combination of the growth in the platform from an underwriting and risk taking on non-multi assets as well as having seen how compelling our positioning is in the multifamily space of controlling the underwriting process, the pricing process and the delivery process that makes us very keen on creating those other lending executions. Brandon Dobell --William Blair & Company : Okay, that makes sense. I want to touch on just-- I think just one bullet point on the slide about the servicing portfolio and the third party valuation versus the book value, that the delta between those two numbers, what's the driver behind that and if rates move up and down is there a big impact on how that spread between third party valuation and book value would look?

Brandon, there is some impact of interest rate as you know because of the prepayment protection in the agency portfolio does not add much impact of interest rate. They do tend to be a bigger impact on the HUD portfolio. The actual prepayment history in the HUD portfolio and the reason being when we book in MSR on those we are only factoring the servicing fees during the time in which there is a yield maintenance payment embedded in the loan which typically on a 35 year HUD loan is going to be 10 years. So obviously there is -- from a pure prepayment theory perspective a lot more years of servicing income coming on those assets. And so those are little more prone to the valuation on an interest rate perspective. The other I guess delta and this is less about interest rate and quarter-to-quarter movement but we do service loans for life insurance companies and others that we don't have any MSR recorded for. There is a portion of the fair value that's associated with that servicing as well. Brandon Dobell --William Blair & Company : Okay. And then final one for me. The increase in the average deal size, that's kind of double edge sword there. How do we think about that dynamic for the balance of this year and I guess maybe the -- probably more importantly as you think about the increase in refinancing opportunities in 2015. Does that larger deal size trend continue? Does the refinancing opportunity have the same impact on average fees? If it is -- for these deals -- really refinancing or as opposed to origination driven, I guess I am trying to figure out how to think about those two dynamics, refinancing opportunity versus a larger loan size as you work through this year but mostly in the next year.

I honestly wish I had a clear answer for you. They do. I would say this that if you look at the deals that we did in Q2, we have at W&D, a number of if you will, ten ton gorilla originators who have very large client, who have done -- the majority of their financing with this originators and with those originators you get on average larger deal size. What has changed is that many of what I would deem are second tier originator have stepped up to start working with larger client. And those larger clients have confidence in them to work with them on the larger financing. And so if you look at the distribution of deal flow and our origination sales force, what you are seeing is that next tier of originators doing larger doing a larger deal which is fantastic. It means to say they got client relationships with larger developers, owners, and operators. And they got their confidence to get the ability to work on larger transactions. I do not know as I -- let to say that in my mind right now I am thinking about originator x who has created a new relationship with borrower, I don't know what borrower y 2015 refinancing volumes looks like. Is it relates to average deal size? But I do believe that since that group of originators has stepped into that type of client relationship that we are going to see the trend. In another words we are going to continue to see larger deal size and as Steve said on the quarter-on-quarter we move from $11 point some million for average deal in Q2 of 2013 up to $14 point something in Q2 of 2014. That's a pretty significant quarter-on-quarter jump. And on the agency side doing over 60% of our deal flow on $20 plus million deals shows that we are -- we are right there on the very biggest and the most competitive deals which we love doing. And those borrowers have a lot of deal flow. And they control a lot of market share. So us being one of the largest providers working with a largest operators that's great. Brandon Dobell --William Blair & Company : So that's a bit of -- it is a double edge sword right but the average deal size goes up compresses some of the fee metric you see but it probably puts you in this conversation with a lot and broader opportunities specially given the different capital raising platform you have now as opposed to coupe of years ago. So couple of years ago being in those conversations wouldn't have helped that much. Because you couldn't put them into loan front of that CMBS conduit or whatever but it sounds like now that you are there, their large deal size maybe isn't a big of an issue because it provides more opportunities for you. Is that the way to think about it?

I think that's exactly right.

(Operator Instructions) Our next question is from Jason Weaver, Sterne Agee Jason Weaver - Sterne Agee & Leach: Hey, good morning. Thanks for taking my question. I want to start off with the HUD lending business. What can you say about any efforts you might have made for aligning their capacity in overhead of that business fluctuating and that the large fluctuation and demand.

Jason, as you can imagine we worked very diligently to do a couple of things. One, to make sure that the origination sales force isn't focused solely on HUD origination because they do come across originations for Fannie, Freddie and other executions, is point one. Point two is that from an underwriting standpoint, underwriters on HUD understand how to underwrite HUD loans; they also in many instances know how to underwrite Fannie and Freddie loans. And so there is some if you will flex capacity there to move resources from one execution to the other. The other piece I would put on it is that we didn't talk about it on the call but we are doing a significant amount of refinancing of our HUD portfolio and HUD has an interest rate reduction program going on right now where refinancing a large portion of our portfolio. And making fees on that. WE do not count that in our origination volume numbers but it is adding economics to our HUD team and that is requiring time, effort and capacity to process those IORs. And so as much as our HUD team is off from a volume standpoint significantly from an actual budget standpoint if not off as significantly just because of the IOR activity.

Our HUD management team is incentive on bottom line performance not top line volume, so they are managing the cost structure in line with the -- both the origination and the refinance opportunity that they are seeing today. Jason Weaver - Sterne Agee & Leach: Okay, thank you. Could you just talk a little bit about how you view the effects on margins from new entrance such and we heard recent financial just entered the DUS funding business and now expect a lot of other banks will be doing that as well.

So as I said previously, Jason, there are 25 Fannie Mae DUS lenders and 25 Freddie Mac Seller\Servicers. It's always been and always will remain a very competitive market. I would put forth you that there are only a few competitors who can really go after the big borrowers and effectively compete for their business. And that really is a group of private Top 5 in both Fannie and Freddie. The Top 5 DUS lenders and the Top 5 Seller\Servicers are real competition. That's not to say that there is not some historic relationship with someone. You use the example of regions bank, I am certain that there is somebody who has done lots of construction financing with regions bank and hasn't launched to any relationship with them. That's sometime in the next couple of years will come along say, I want to do my DUS execution with region because I have a long standing relationship with region and I would like to use them. But we have seen a lot of very powerful, very big financial services institutions coming to this space and some have been successful and some have not been successful. We feel very well positioned from our track record relationship with the agencies and access to deal flow to remain one of the very biggest and it's always going to be competitive landscape. So if you said that DUS license was retired and went away, it wasn't going to change our world and if you say that it has been acquired by regions or anybody else, I don't think it changes our world that much either. Jason Weaver - Sterne Agee & Leach: Fair enough, understood. And one more quick one. Post the release of the score card, do you have any new thoughts on what's the previous question last quarter regarding GSE affordable housing targets and the tenant impact on multifamily business industry wise.

So affordable is a very important component of the FHFA scorecard. And both Fannie and Freddie have significant affordable housing target. And as I think we've mentioned previously Fannie from whether they aggregate deal flow generally speaking doesn't have a hard time getting to their affordable target where as Freddie because of types of deal they focus on, is always working very hard to make it to their affordable housing target. But as you know has always made them. And so the bottom line there is that we know that the affordable space is a space that both the agencies are focused on. We are doing as much deal flow in that space as we can. I believe that we were the third largest affordable originator for Fannie Mae in 2013. And one of the other ways that Freddie has moved towards affordable is to enter the manufactured housing space. And FHFA has allowed Freddie to get into the manufactured housing space. We were Fannie Mae's largest manufactured housing originator in 2013. We've a very large client base in manufactured housing. And so the fact that the Freddie is now in that space and we were one of the few lenders selected in pilot program and they now opened up that to everybody in the manufactured housing space. That's positive to us; provide us with another capital solution for our manufactured housing client.

And it appears that we have no further questions at this time. I would be happy to return the conference to Mr. Willy Walker for any concluding comments.

Great. And thank you all for joining us today. And we will be talking to many of you in the near future. Thanks. Have a great day.

This does conclude today's conference call. Please disconnect your line at this time. And have a wonderful day.