Walker & Dunlop reported a third-quarter loss after taking charges to accelerate the resolution of legacy loans tied to borrower-fraud investigations. The company said Fannie Mae has completed its review, following Freddie Mac’s completion of a similar review in the second quarter, and it does not expect further loan buybacks or indemnifications related to the investigations.
The quarter also reflected a difficult market for commercial real estate financing: revenue and total transaction volume declined from a year earlier. Walker & Dunlop is shifting its attention toward multifamily lending and plans to sell the legacy assets that weighed on earnings by early 2027.
Key details
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A loss driven by legacy loan actions: Walker & Dunlop reported a net loss of $37.3 million, or $1.15 per diluted share. The company attributed the loss primarily to charges connected with accelerating the resolution of repurchased loans and indemnified assets. It reclassified repurchased assets and non-performing notes as held for sale and intends to dispose of them by early 2027.
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Underlying earnings also declined: Adjusted core earnings per share were 92 cents, down 25% from a year earlier. The company cited lower revenue and higher costs in its repurchased portfolio; it expects those portfolio costs to be eliminated by early 2027.
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Revenue fell as business mix shifted: Total revenue was $298.4 million, down 12% year over year. The company said the decline was broadly in line with lower transaction volumes and reflected a greater share of brokered transactions relative to government-sponsored enterprise lending.
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Debt financing volume was relatively resilient, but the mix changed: Total debt financing volume was $10.3 billion, down 5%. Brokered volume rose 58% to $7.2 billion, offsetting declines in lending through Fannie Mae, Freddie Mac and Ginnie Mae. Fannie Mae volume fell 40% to $1.3 billion, while Freddie Mac volume dropped 63% to $1.4 billion.
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Overall transaction activity weakened: Total transaction volume, including property sales, was $13.8 billion, down 11%. Property sales volume fell 25% to $3.5 billion, although the company said sales activity improved sequentially during the quarter.
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GSE market share increased year to date: Walker & Dunlop said its share of the GSE market rose 2.9 percentage points to 13.7% compared with the same period last year. It also said it continued to expand in non-agency multifamily lending.
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The servicing portfolio grew: The portfolio reached $146.6 billion at September 30, up 5% from a year earlier. The company described servicing as a source of recurring revenue and cash flow.
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Management cited rate volatility as a headwind: The 10-year Treasury rate rose 84 basis points during the quarter, which the company said increased volatility and slowed capital-markets activity. Total debt financing volume nevertheless declined less than 5% from the prior-year quarter.
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The company is reorganizing around multifamily and efficiency: Walker & Dunlop said it reduced its workforce and reorganized during the quarter, while using technology to improve productivity, client relationships and its fixed-cost structure. CEO Willy Walker pointed to roughly $1 trillion of multifamily loans maturing over the next four years as a significant market opportunity.
What changes for the company
The completed GSE reviews and planned sale of the legacy assets mark a shift from managing the investigations’ fallout toward reducing the related balance-sheet exposure. The charges weigh heavily on current results, while the company expects costs tied to the repurchased portfolio to be gone by early 2027. At the same time, the weaker quarterly results show that its business remains exposed to lower transaction activity and interest-rate volatility, even as brokered financing and servicing provide support.