I’m 2 years out of college and have been working in GSE underwriting and now production. I read on here a decent bit about people advising to avoid the GSE groups at banks/lenders if possible. Why is that? My office does pretty much all GSE but other offices in the firm do balance sheet, Mezz, cmbs, etc... I don’t have a ton of exposure to them but pay seems comparable, GSE business is half the debt market, and loan originators for GSE loans make very good money. So why do people advise to join other lending groups if possible?
If I had to guess it would be because GSE business is more vanilla and can get repetitive. Thoughts?
Repetitive job. You’re covered at 65-70% on leverage basis, 1.25x on coverage so underwriting doesnt even matter just trend historical 3%, get fees, repeat, move on to next one. The one time it gets fun is when deals don’t size and you have to adjust those boilerplate underwriting, but this happens very infrequently.
Pay is decent but repetitiveness can be for some people. Great job starting out but learning curve plateaus after 2 years or so, wouldn’t you agree? Least that was the case for me.
I’d say though, if you’re that guy, or gal, that wants stability making decent money it’s worth sticking around.
Yeah, I agree things can get repetitive and I would like to see other asset types and different Capital structures. I’m basically trying to decide if I want to try to stick it out and get on the path to becoming an originator, cause I like my job, people I work with, etc... or start looking around for different roles outside of the GSE lending world.
I think if you like your job, like the team, and have a reasonable path to success (whatever your definition is), I'm not sure why you would want to switch. I was at a GSE and switched to a debt fund because I wanted broader exposure and happened to get higher pay. I think when we're recommending to younger people, most people aren't totally sure what they want to do so the belief is to get them the broadest experience so that they can find their natural landing spot. You can make a ton of $ in GSE, if you're comfortable with just doing multifamily then you should stay. As one originator put it bluntly, doing strictly GSE can be boring but you're paid to be bored.
Another benefit of GSEs that no one mentioned is job stability. When the market sh*t the bed in 2008, a lot of people still kept their jobs in GSEs. MF is a dependable asset class and the GSEs have very solid business models.
I was at Freddie Mac in 2009. It was a blood bath. Maybe 5% of employees at Freddie today were there in 2009.
** waiting for thdddd to come in and boast about how much volume the GSE's do **
Made my day.
I would advise against being a lender, period. Woof.
Why so? And are you referring to working for a Bank/LifeCo/GSE itself or someone like an intermediary/broker (HFF/Easdil/JLL) who deals with lenders?
More or less just some lighthearted trolling. Picture the kid in class who makes a big show about turning his or her homework in on time and tattles on you for every little thing because they love following rules above all else. That's a lender. ;)
Whats everybody take on how GSE reform is going to affect business of GSE and their approved lenders? Will origination volumes drop?
That’s definitely a possibility, I think there is a good chance Freddie and Fannie Multifamily divisions are spun off and operate as independent companies post reform. Due to the affordability crisis I believe the government will continue to incentivize them to do a lot of affordable business, but their uncapped or non affordable business which is limited to $35 billion a year could be at risk. However, I would image if they are operating as public companies and answering to share holders they are going to do everything in their power to hold on to that market share.
Reform will not happen in the near future. Fannie and Freddie are throwing off something like $23 billion a year into the U.S. Treasury. There is no political will to re-privatize the GSEs in either party.
There is no political will for now, until the GOP establishment is replaced by a blend of hard-line conservatives and libertarians, which is coming. Also, distrust in the Federal government is at all-time highs. The vast majority of productive individuals want the Federal government out of the business world and their lives.
I don't see it. Not any time in the foreseeable future. It's too lucrative for the Feds. It would take too much political capital to pull off with only marginal conservative policy benefit.
Maybe you are right. Do you think that material rising delinquency/defaults could change this?
I get so pissed because I used to work in multifamily IS and saw how these GSE's played favorites and gave preferential terms to whale developers/owners so they could expand their 9 figure personal net worth while young guys trying to get into the game couldn't qualify, were ignored, or received poorer terms. Textbook example of government intervention contributing to the rising wealth inequality and gutting of small business America.
These entities were originally created to help more Americans achieve home-ownership - now they greatly contribute to the consolidation of property ownership. It makes me furious.
I agree with you 110%. I think it's egregious how the GSEs behave, how they've unnecessarily created a near-monopoly out of multifamily lending and, with the power of gov't, given favorable terms to rich people to allow them to get even richer.
You and I are both conservatives, but we reject crony capitalism. There are more egregious forms of cronyism out there, but this is just all so unnecessary.
Exactly - let's call it what it is, plutocrat welfare. It is arguably the biggest fucking honeypot in all of finance right now for mega HNW individuals to arb yield risk-free on the backs of the American taxpayer. This and the entire tax credit system - another ingenious idea of big government.
Yep, LIHTC has made a select few people very wealthy, created housing ghettos and has never even had to prove that it is effective in helping people transition from low-income wards of the state to independent adults. But it is AMAZING for virtue signaling.
This is ridiculous. LIHTC has done no more and no less for any of what you're discussing than privately owned multifamily in general has. Some operators are responsible, some aren't. Some people operate their buildings like ghettos, others try and provide the ideal of a clean and safe place to live. I understand that when LIHTC developers do this, it's at taxpayer expense, but that is easily remedied. Have more oversight of developers using LIHTCs. Some operators/developers are building/rehabbing LIHTC properties in high-regulatory states, some aren't. Go tour LIHTC housing in NYC. It's significantly better maintained than most "low-income" private housing stock. Because the government makes sure of it. Pairing a no-risk tax credit program like LIHTC with no continuing oversight or regulation is a great way to get the conditions you describe - that doesn't sound reflective of anything I've seen in the Tri-State Area (which is all I can speak to). I get the feeling from your posts that you are looking at housing which has next to no oversight; again, I'm much more familiar with HFA/HPD/HDC/HMFA, so I can't speak to conditions in, say, rural Tennessee, but if owners and operators are getting away with proverbial murder, then that is a failure of the system to enforce code compliance, not with the program in and of itself.
And it isn't surprising that you associate it with virtue signaling. It's a Reagan-era tax program, which means it may as well be painted with a sign that says "I'm here to funnel money into fewer and fewer hands while giving the appearance of doing right by the American people." That could sum up the entirety of the Reagan era. There are plenty of better alternatives to LIHTC, just not any that are politically palatable. Neither side of the aisle will give up on publicly subsidized housing, it's too costly from a votes perspective. And conservatives on Capitol Hill generally oppose reducing LIHTC and expanding voucher programs, which are generally considered more effective and efficient, because they are "handouts".
LIHTC is a complete racket. Even if I believed in the principle of gov't assisted affordable housing--which I don't--LIHTC is one of the least effective ways conceivable to allocate funds toward affordable housing. A few people who specialize in the industry--consultants, tax accountants, developers--make a really good living building really expensive affordable housing units.
It's utterly irrelevant if operators are "responsible" or not. The system is economically inefficient and doesn't help people move out of poverty. "Affordable housing" (all kinds of it) locks people into a lifetime of subsistence and geographic immobility. "Affordable housing" provides political cover to state and local governments to refuse to allow enough construction for supply to equal demand, leading states like California to become highly economically stratified.
And despite providing a sub-optimal solution to housing which is affordable, a tiny few profit handsomely from the racket.
This is what leftists do. Any policy that came out of the 1980s is a "Reagan-era" policy. Oppose amnesty for illegal immigrants? Well, that makes you opposed to Ronald Reagan. Of course, most leftists don't even know any conservatives, so they have this caricature of conservatives in their mind that includes us sitting around a fire singing worship songs to Reagan.
Right, it's called submitting to the law of supply and demand, something the Democrats abandoned generations ago.
"Conservatives" don't support subsidized housing and LIHTC. Some Republicans on Capitol Hill might, but that's because every newly elected politician (and this is a fact, not hyperbole) is "educated" by the affordable housing lobby. Every single one of them. As someone who has come from the affordable housing world, the industry is overwhelmingly Democrat dominated. The idea that you're putting this at the feet of "conservatives" is absurd. It's utterly absurd.
They have a monopoly in secondary and tertiary markets with small balance loans (Fannie and/or Freddie). Of course if you're borrowing really big bucks, yeah, Fannie is pretty much the best and only route.
I, like most of you have extensive ties in agency lending and the only deals they get in top tier markets it seems are the fringe deals with tons of cash out and a little hair on them. Otherwise, we have regional banks and CU's with the same rates and much softer prepays.
I do find the zero tax returns to be a total joke though. It reminds me of stated income resi loans way back when. You're basically inviting fraudulent financial statements.
Grab popcorn before continuing from this point…
Edit: hmm that didn’t post where I wanted it to.
My buddy who is a GSE originator makes above $300k in his mid 20s. He works a TON though and is in a really good spot and is being groomed to take over his market. When you're one of the top guys at shop/market, i've heard you can pull in compensation in the low millions of $ annually. And it's a very stable job.
But it sounds boring looking at the same product type all day every day.
Yeah the originators at my shop definitely make some serious money, but having GSE lending be the only thing I ever do in real estate besides possible personal investing on the side sounds very limiting. The good news is my compensation is good for my market and I’m 24 so I have plenty of time to figure this stuff out. Maybe I’ll end up in REPE (if I work my ass off networking), maybe I’ll stick with originations, maybe I’ll go to trade school become an airplane mechanic, buy a shit ton of land, forget this forum, and fix up old planes in my backyard on the weekends.
Hell yeah brotha. Love seeing this type of thinking, do what YOU want.
I wish I had ignored so much of this "keep the door open for Blackstone in case you want to work there later" nonsense when I was younger. That guy below who asked "what about repe?" -- fuck that guy. Move up fast, move up now when you're young. Boring is ok, making money doesn't have to be intellectually stimulating. You can make a ton doing agency loans. Later when you're making 700k a year it will be w lot easier to change paths or dabble in other shit.
He works for freddie/fannie or is he at one of the GSE approved lenders? Does he have a niche like small balance?
GSE lending covers a wide array of multifamily business, including affordable housing (bonds, LIHTC, Section 8), workforce housing, manufactured housing, revolving credit facilities, small balance loans, conventional loans, mezz debt, other subordinate and/or soft debt, new construction, and renovation, with the wrinkle of CMBS in there as well. Maybe the servicing and origination is more interesting than the underwriting, but I've got to think that there is plenty of interesting wrinkles to keep your attention.
GSE's could eventually be privatized. There is no reason why the American taxpayer should backstop non-recourse welfare loans to developers. Ridiculous.
I agree entirely, but where is the political will to give up $23 billion per year to the Treasury? There is zero will among Democrats and little will among Republicans.
What about REPE ? If you spend too much time in lending, it's hard to leave ..
I am in GSE lending and am struggling to find REPE firms in DFW. That being said, I am also not looking for an analyst position since I am about to get promoted to VP at my shop. I'd prefer to work inside MF, but any recruiters just hit me up for asset management which I am not looking to move into. I'd much rather work on the debt side of a MF REPE.
Don't go into RE asset mgt .. it is valuable but underlooked from the investments development side..you basically execute and follow up other people's investment plans
I've seen people from the investments team going in debt to get managerial experience and once VP switching back to higher investments role .. get your title and hit your network
How much wholesale lending goes on in the GSE space? I know of Sabal Capital, but are there others? There are a lot debt brokerage shops out there but only so many approved GSE lenders. If you are a broker and have a client who is a good fit for one of the GSE programs but you don't have access do you just hope your client does not know about it?
Somebody correct me if I'm wrong, but if you're a multifamily debt broker, assuming you have the relationship, you can definitely broker out to approved lenders. I know at my previous shop we used brokers to shop dozens (literally, dozens) of different loan products and lenders, which included the GSEs.
What do you mean by dont have access to? A broker can reach out to the two dozen or so GSE approved lenders. And in my experience the GSE approved lenders will be glad to pay the brokers too, so its a win-win.
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