What Walker & Dunlop (WD) Said on Its Q3 Earnings Call

Key Points

• Walker & Dunlop posted a $1.15 diluted loss per share in Q3 as revenue fell 12% to $298 million and transaction volume declined 11%. It recorded $49 million in additional valuation adjustments as it accelerated sales of repurchased loans and related real estate, with most sales expected by year-end or early 2027.
• The company expects its cost reductions to generate about $20 million in annual savings, with the full benefit anticipated in the second half of 2027. Its 2026 outlook calls for adjusted core earnings of $4 to $4.50 per share and adjusted EBITDA of $260 million to $280 million.
• Management is prioritizing multifamily financing amid higher rates and weaker deal activity, citing $525 billion in multifamily debt maturing through 2028. Brokered debt originations rose 58% year over year, while GSE originations fell 55%.

Walker & Dunlop NYSE: WD reported a third-quarter 2026 loss after accelerating plans to sell loans and real estate tied to repurchases stemming from Fannie Mae and Freddie Mac fraud investigations. The company also announced workforce reductions and a renewed focus on multifamily financing as higher interest rates weighed on transaction activity.

The commercial real estate finance company reported a diluted loss of $1.15 per share, compared with adjusted core earnings of $0.92 per share and adjusted EBITDA of $61 million. Revenue fell 12% from a year earlier to $298 million, while total transaction volume declined 11%.

Chairman and CEO Willy Walker said an 85-basis-point increase in the 10-year Treasury rate during the quarter pushed borrowers toward shorter-term, often floating-rate debt. Brokered debt originations rose 58% year over year, while government-sponsored enterprise, or GSE, originations fell 55% and HUD originations dropped 29%. Investment sales volume declined 25%.

Repurchased Assets Marked Down for Sale

Walker said Freddie Mac completed loan-level reviews connected to its fraud investigation at the end of the second quarter and Fannie Mae has finalized its investigation. The company does not expect further repurchase requests or loan losses related to those investigations, he said.

Rather than continue holding and working through the repurchased loans and foreclosed assets, Walker & Dunlop decided to sell them and reduce their carrying values to reflect estimated proceeds. CFO Greg Florkowski said the company recorded $49 million in additional valuation adjustments under the accelerated sale plan.

The quarter also included an $8 million charge to finalize a modified loss-sharing arrangement with Fannie Mae, below the company’s previously disclosed range of $12 million to $16 million. Another $7 million reflected ongoing costs to hold and operate real estate associated with legacy repurchase loans.

About one-third of the assets’ carrying value was under letters of intent, while the remaining two-thirds had just been brought to market, Florkowski said. The company expects to sell most of the assets by year-end and the remainder early in 2027.

Florkowski said higher interest rates affected valuations, but Walker emphasized that the markdown reflected the decision to sell promptly rather than hold the assets for a potential recovery. Management expects any further gains or losses on the sales to be modest relative to the third-quarter charges, though Florkowski said price discovery was still underway for much of the portfolio.

Cost Cuts and Full-Year Outlook

The company initiated workforce reductions and negotiated retirements in the fourth quarter. Florkowski said the actions announced to date are expected to improve net operating income by approximately $20 million annually, largely through personnel and other expense reductions. The company expects a related fourth-quarter charge of $3 million to $4 million and the full benefit in the second half of 2027.

Walker & Dunlop is also evaluating businesses for repositioning, wind-down or sale. Florkowski declined to provide 2027 earnings guidance, saying the company expects to offer more detail on its year-end call.

For 2026, management expects:

• GAAP diluted earnings per share ranging from a loss of $0.10 to earnings of $0.30.
• Adjusted core earnings of $4 to $4.50 per share, including $0.90 to $1.40 in the fourth quarter.
• Adjusted EBITDA of $260 million to $280 million.

Florkowski said the guidance reflects uncertainty around transaction volumes and assumes a fourth-quarter increase in debt originations from third-quarter levels, largely from improved GSE lending. The ranges exclude any additional valuation adjustments needed as legacy asset sale prices are finalized.

Servicing Portfolio and Multifamily Strategy

The servicing portfolio ended the quarter at $147 billion and generated approximately 40% of year-to-date revenue, Florkowski said. Within the $74 billion Fannie Mae at-risk servicing portfolio, 18 loans were in default, representing a 36-basis-point default rate. No other loans in that portfolio were 60 or more days delinquent, he said.

Walker distinguished ordinary credit losses from losses tied to the fraud investigations. He said the company expects normal loss-sharing in 2027 and is building specific reserves for potential losses.

Management also outlined a strategic pivot toward multifamily business. Walker called the effort the “Sprint to ’28,” while saying the company would continue work in other property types. He cited more than $1.2 trillion in commercial real estate debt maturing through 2028, including $525 billion in multifamily debt, as an opportunity for refinancing, sales and recapitalizations.

The board approved a quarterly dividend of $0.68 per share. Walker & Dunlop ended the quarter with $183 million in cash and had a $150 million working capital line, Florkowski said.

About Walker & Dunlop (NYSE:WD)

Walker & Dunlop, Inc is a commercial real estate finance and advisory firm serving property owners, investors and developers across the United States. The company provides financing, investment sales, valuation, research and advisory services for a broad range of commercial real estate assets, including multifamily, office, industrial, retail, hospitality and senior housing properties.

Its financing business arranges debt and equity solutions through relationships with banks, life insurance companies, government-sponsored enterprises and other capital providers.

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