Why not GSE lending? Stigmas?

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?

Comments (63)

Apr 23, 2019

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.

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Apr 23, 2019

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.

Apr 23, 2019

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.

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Apr 23, 2019

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.

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Apr 23, 2019
buggylovesfinance:

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.

Funniest
Apr 23, 2019

** waiting for thdddd to come in and boast about how much volume the GSE's do **

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May 16, 2019

Size movers gotta move size

May 20, 2019
Vito_Genovese:

** waiting for thdddd to come in and boast about how much volume the GSE's do **

Made my day.

Apr 23, 2019

I would advise against being a lender, period. Woof.

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Apr 23, 2019

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?

Apr 23, 2019

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. ;)

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Apr 23, 2019

Whats everybody take on how GSE reform is going to affect business of GSE and their approved lenders? Will origination volumes drop?

Apr 23, 2019

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.

Apr 23, 2019
Brody92:

Whats everybody take on how GSE reform is going to affect business of GSE and their approved lenders? Will origination volumes drop?

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.

Apr 24, 2019

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.

Apr 24, 2019

Grab popcorn before continuing from this point...

Edit: hmm that didn't post where I wanted it to.

Apr 23, 2019

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.

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Apr 23, 2019

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.

Apr 23, 2019
ManyLeatherBoundBooks:

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.

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May 15, 2019

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.

Apr 23, 2019

He works for freddie/fannie or is he at one of the GSE approved lenders? Does he have a niche like small balance?

Apr 23, 2019

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.

Apr 23, 2019

GSE's could eventually be privatized. There is no reason why the American taxpayer should backstop non-recourse welfare loans to developers. Ridiculous.

Apr 23, 2019
InVinoVeritas:

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.

Apr 24, 2019

What about REPE ?
If you spend too much time in lending, it's hard to leave ..

Apr 24, 2019

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.

Apr 25, 2019

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

Apr 24, 2019

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?

Apr 24, 2019
Mimbs:

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.

Apr 24, 2019

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.

Apr 25, 2019
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