Bridging The Affordability Gap with Priscilla Almodovar

Introduction there's a quote that I've heard you say which is it's much easier to get things done if you don't worry about who gets credit can you actually act in the public sector by that quote if you want to get done anything especially in government You Must Share Credit in government I learn first of all policy is key to really have big impact and big Solutions you need good policy but sharing credit and give everyone credit and you get a lot of things done prominent CEOs leading economy iconic investors insights from the experts The Walker webcast with Willie Walker see who's [Music] next welcome to another Walker webcast it's my real pleasure uh to have my friend and um I would partner Priscilla almadovar the CEO of Fanny May joining us today uh before I dive into an intro on Priscilla and uh just a couple quick things at the top of the um broadcast this week first of all we're just about to have our 200th Walker webcast which is um it's hard to believe that we've done 200 of these and I'm deeply thankful to Susan and the rest of the Walker webcast team for all the hard work that's gone into making this uh both have legs and also be able to attract the incredible guests such as Priscilla that we've been able to get on a weekly basis uh my guest for the two 200th is going to be General David Petraeus um and I'm super super super excited to have General Petraeus join me next week to talk about the world we live in from his perspective uh as a uh former General um and uh now sitting at KKR working with KKR on their Global Security strategies for all the different Investments the KKR makes around the globe uh but we will talk as you can imagine uh about Europe about the Middle East about about China uh and about US foreign policy and military policy uh as we uh approach the presidential elections um the second thing that I just had to point out because it's just um Priscilla is an adamant athlete and spends a lot of time running many of the people who listen to the webcast know that I do a lot of biking um the death of the two brothers last week in New Jersey on Friday uh Thursday night uh there for their sister's wedding on Friday um is just so heartbreaking and more than losing two outstanding young men um one of the brothers having won the Hobie Baker award and been an NHL Allstar for years and years and being at their sister's uh there for her wedding um but more importantly just the the fact that they couldn't go out and ride their bikes on the road and getting hit by a drunk driver and losing both of their lives um quite honestly all of my biking Community friends um we were all texting about just what a sad sad event and just how sad it is that our roads aren't safe enough for people to go out and get the type of exercise that those two incredible athletes were getting uh last Thursday evening and obviously our thoughts and prayers go out to their family for their tragic loss um and then finally um I would say that a lot of people tune in to sort of hear my perspective on what's going on in the markets and I try and always keep the the the light on my guest and today's guest will give us great Insight I think into what's going on in the econom I mean what we should expect as it relates to sort of fed policy and and mortgage rates and things of that nature going on I know Priscilla will try and demure on a lot of that saying that she's got economists who do all that for her but I'm gonna I'm G to push her on that one a little bit um but I would just say that it's very evident that with rate cuts on the horizon um investors in commercial real estate and more specifically in multif family um are quite active again um we are seeing a a a a huge uptick um in activity kind of across the sales and financing um side of our business um and it's uh it's a after the great tightening uh nice to see a little bit of a thaw coming um and I think the other piece to it is that with rates having been quite stable uh in this sort of 375 to 450 range um having an ability to put a cost of capital uh on deals that has allowed for actual bitter lists to grow people to actually get some type of conviction that they're buying at a real cap rate with real financing costs that they can underwrite uh and that's obviously allowing for transaction volumes to start to um recover um to where they were um not quite pre great tightening uh but certainly quite a change from 2023 um so let me do a quick introduction to Priscilla and then we will dive into our discussion Priscilla almadovar is President and chief executive officer of Fanny May a leading Willy introduces Priscilla Almodovar. provider of mortgage financing in the United States and serves on Fanny May's board of directors Priscilla leads Fanny May's mission to facilitate Equitable and sustainable access to home ownership and quality affordable rental housing Across America prior to joining Fanny May Priscilla was president and CEO of Enterprise Community Partners a National Organization focused on investing and increasing the supply of affordable housing previously she was a managing director at JP Morgan Chase where she led two of the firm's National real estate businesses earlier in her career Priscilla was president and CEO of the New York State Housing Finance Agency and the state of New York mortgage agency Priscilla started her career as a partner at the global Law Firm white and case specializing in international project Finance Priscilla is a board member of realy income Corporation and also serves on the board of New York Road Runners she earned a bachelor's degree from HRA University and a law degree from Colombia so Priscilla you were born in Brooklyn you went to college and Law School in New York you worked at White and case in New York for 14 years before then going to work for the state of New York you then went to the largest bank in New York and then you went to Enterprise my question is How Fannie Mae got Priscilla to Washington. how did Fanny May get you to come to Washington oh gosh uh well first of all uh Willie thank you for having me congratulations on your 200th uh episode that's a that's a big number and thank you for your partnership and your entire team at Walker Dunlap I mean you're a number one uh our number one dust lender so we really appreciate working with you um so yes I'm a true New Yorker um but Enterprise got me to go to Maryland so I know the you did you move you didn't move the ball well I was going to move but this thing called the covid pandemic happened so so I did not move and these days I spend half my time in DC I'm I'm in New York today because of the holiday uh weekend um but I spent Tuesdays to Thursdays in DC and because you're a runner my running these days is only in DC so um I'm signed up for the October um army race at a 10 mile um I did the April cherry blossom so I feel I'm sort of just as an aside Priscilla I checked it you did negative splits on the on the cherry blossom yes I'm slow I'm slow but I'm a smarter Runner negative splits you went you went started slower and you got faster throughout the race that's that's the idea I was slow um because I have not been running I love my job the one thing that has sacrificed a bit is my running um I was going slowly but I knew when you run I had more gas in the tank so I did at the end pull through and it was a beautiful day for anyone who did it start a legacy start turning dreams into realities a better world begins with you better communities start with us so getting you to come to DC one of the things that I thought was so Childhood aspirations and getting into law school. interesting in listening to some of your previous interviews was that you had a briefcase when you were six years old so uh knowing that you went into International project finance and into real EST State when you were that little six-year-old in Brooklyn New York what was what was the dream that was going to what was going to be in that briefcase as a six- yearold uh versus where you've ended up in your career gosh um I I don't know what I thought as a six-year old but I knew I knew I wanted to be a boss I've just own that um and I've always been um very hardworking very optimistic very much of a c and do um attitude so um a relative gave me a literally an atache case um as a holiday gift and that became my book bag and I would proudly take it to school every day and uh it's um someone told me that it sums me up pretty well um was there anything that was outside of sort of business that you as a as a as a as a young girl aspired to is there ever a a ballerina thought or a a uh um a school teacher thought or something else that or was it always I'm going to go do business and if so why'd you do law school rather than going to business school yeah no that that's a great question so I wish I can I wish I had some good answer than to say I just I just likeed to learn and uh didn't have much of a plan um I um I went to college I went to host at 16 years old um I was clearly I was a um a big fish in a small pond and I'm very grateful to the place and time came like Gra graduated I was n i was 19 I now was Junior and I had this tremendous uh guidance counselor and she said to me I was an economics major she like you can get a PhD in economics you can go to business school or you can go to law school and um I didn't know what I wanted to do at that point um but she did say that law school was probably the most flexible um of all of them so I went to law school and when you get out of law school you go to work for white and case and you became a partner at White and Working in White & Case. case um and one of the few female Partners at White and case was that an opportunity or a burden an opportunity you know honestly um I grew up in white case I like to say um I was I was very young as an associate I did become a partner I was I think at the time I might have been the third women partner at the time um I just you know again I've been very fortunate to have been surrounded by leaders who seen my potential have given me opportunities and uh you know uh that's when I learned that probably I would have gone to business school if I had known then um because I was a corporate lawyer and it's there it's quite common uh for corporate lawyers who do deal work by the way um like you I could have been Latin America my first like 10 years in my career was almost all this is in the 1990s um doing all the privatizations of Banks and airports and tll Roads um so I could have on that route but life takes turns and um 20 years ago I discovered housing and you went through my bio it's bny May is my fifth role in this incredible U industry that we're part of before we jump to that as it relates to White and case days I I'm certain that you and I were sitting on some airplane between New York and Argentina when I was doing deals from Morgan Stanley and I know what yes I I am sure it's one of those things where I thought back on I was like there's no out that we were like sitting across the aisle from each other and had absolutely no idea that 30 years later we'd be doing something like this together but it's it's kind of wild I had the same thought Willie when I learned it about you no doubt um so I've heard you say that leaving Whit and case was the riskiest thing you've ever done yeah why why take the risk or what was Why jump into state government? it about jumping into state government that had you leave quite honestly the very established lucrative secure world of white and case and kind of jump into local state politics yeah so it was the biggest decision I've ever made professionally um not only did I love my practice my clients my partners were fantastic I mean I I literally grew up there as I said um and I think what happened you know life is long um at that point I had two children with my husband who also has a 20 you know 247 kind of job and um I took a leave of absence um it's a leave of absence was two months it turned out to be two years and during that time I guess I'm not someone who sits still um I started uh working on a campaign uh actually wasn't a campaign officially yet I started working on policy work I didn't know anything about policy um and it literally changed the trajectory of my life and that's when I discovered housing and I mean so you discover housing but come on there like there's Discovering the passion for housing. got to be something more there to say I'm I'm jumping out of the the Ivory Tower literally to go and like roll up my sleeves I mean I know that first of all you you know when you were growing up in Brooklyn At first your your family was renters and then you became own when you were like five years old so you you clearly saw the the the progression and and all of us have some sense of where we're from the and the actual structure or building that we lived in and what those formative years were but what was it about housing policy Housing Finance that got you so engaged in the what was that 2007 2008 2004 2004 five I'm pretty actually easy on that one you and I are exactly the same age so anything you say is it relates to that I know exactly where I was when I was six because you and I were six at the same time so yeah talk about that what was it that got you so so engaged in it yeah no I I think I think you sort of have touched on it so first I love Finance number one number two project finance and then I discovered housing which also was all about people and um I love people so I found this industry where I could have a huge impact on people and the mission I think back to that six-year-old girl who um had that attaché case you know I grew up as a renter um I grew in a very loving home my parents came from Puerto Rico in the 1950s and um I remember they were Savers they bought their first home when I was five years old and that home I mean this is the work we do it's about people who saved were renters and bought a home and that home paid for my education paid for my law school paid for my siblings education so I I found an area in finance that um I could do it all and potentially have an impact I think if I think of my parents they were always very um uh my mom was a very religious person and I think giving back so I found something where I can give back and still do complex interesting work and um as I said I this is my fifth role I've been in three sectors all doing housing I've been in the public sector when three years when I ran the New York State housing agency then JP Morgan I ran two businesses there so I start from the private side and probably one of the best bank well run banks in the world um then Enterprise I thought I would retire from Enterprise I was a former board member of Enterprise and um then I got a call from a Head Hunter and I got to Fanny May so um I've been fortunate with each role to stay in housing and each one just gave me a bigger platform to hopefully have a bigger impact and holy cow Fanny May is the culmination of all of it because I think it's one of the rare jobs I don't know if you can think of many that touches all of housing from renters ship to home ownership and that's my story I get the full Continuum and by the way all the stakeholders like holy cow how many stakeholders there are that Fanny May has to manage so it's I view this this position as a culmination of my 35 plus years because what I even learned at one I I drawn that experience as well um so it's all coming together in this pretty incredible role and um hopefully it could have an impact in the country I'm not so sure that this is the final stop I I I was thinking about your career and sha Donovan's career and sha would ran the New York Housing Authority then he went to uh then he went to run HUD then om then Enterprise and so I'm think I think you might have to go from Fanny to om and run om for a period of time Priscilla to kind of you know so you and Sean can stay on those on those parallel paths you know Sean is one of my proudest one thing I will share with you what's amazing about housing Sean was one of the people I met back in probably 2006 and I we're still very good friends I mean one of my uh proudest relationships from State service was my relationship with Sean so I mean I still go back 20 years I have the same relationships that's what's so great about what we do I'm sure it's true of you I mean I've been working with people and again this is my fifth position and I'm still drawing on there were many on the multif family side but you know the three years I was in single family in New York state had those relationships as well so before we jump from New York How to get things done in public sector. state to um JP Morgan for a moment um I've there's a quote that you uh that I've heard you say which is it's much easier to get things done if you don't worry about who gets credit uh which is a great quote except it's sort of the antithesis of what I found when I ran the DC Water Authority and dealt with politicians from DC Maryland Virginia and all around where it seemed like the only thing that people were cared about was who got credit for something so for a moment given that you've been in the private sector as well as in the public sector um do you think that you C can you actually act in the public sector by that quote of it's easier to get things done if you don't worry about who gets credit for it I learned that in the public sector really yes that certainly isn't what I've seen in the public sector all they care about is who gets credit no well so if I may so one I Lessons learned working in Fannie Mae. learned many things in in the public sector but I will I was very new I didn't know anything about government I mean I was at one case all those years I get you know one New York State housing agency and there was this um major deal that we were going to do and we were going to bring the governor to go to the gr the ribbon cutting and we didn't call anyone we just went to the ribbon cutting I get back to the office and the state assemblyman called me and said what do you mean you're and you know he had a personality and said you you're supposed to call the state assemblyman the senator the mayor and naive me said why would I do that they had nothing to do with it and did I get schooled and he said to me until this day he's pass he deceased now till this day I have learned if you want to get done anything especially in government You Must Share Credit because we actually Sean Don and I would talk about this he had a very strong principle I had a very strong principal and we're like wait a second they have different different constituencies the two of us could do things everybody gets credit so I learned that lesson in government now what's that expression success has a lot of fathers right whatever so um but yes to the contrary I have learned in government I learn first of all policy is key to really have big impact and big Solutions you need good policy but sharing credit and give everyone credit and you get a lot of things done super interesting it's super interesting I I when we were when I was running DC water we we built this digestor which was a $400 million um biosolid uh treatment plant where we take the the the biosolids from the treatment and we'd burn them and turn it into electricity and then that would that now generates all the electricity for blue planes which is the um wastewater treatment plant in Washington DC the largest in the world and um when we actually made the decision at the board to fund it was 2009 and fast forward to 2016 I think it was when they actually had done all the studies built the darn thing and it was up and going and made blue planes self-sufficient as it relates to energy and I looked at the front page of the Washington Post and there's this great ribbon cutting ceremony and there's that the mayor of DC at that time not Adrien Fenty who was there as the mayor who actually got me to do that the new chairman of the board not me the new you know the new head of DC water not George Hawkins who actually did it and I'm sitting looking at all these people taking credit for it and I said that's the only way you get really big stuff done is if people are happy to get it done and not be there for taking credit for it so I think it's it's a very similar type thing I think your point as it relates to sharing credit is a very important one but at the same time I also saw a lot of people say that if I'm not going to be on the front page of the Washington Post it's not worth my vote it's not worth my time so sorry for them yeah EX ex l so um the Public vs. private: Difference in purpose and mission the one other piece to working for New York State Mission purpose and people um what was what what was unique about the mission purpose and people at the state level versus you know what You' done previously in the private sector yeah so um what I learned also first of all I was in the state during the great financial crisis so um I learned what I learned there I learned a lot about you could motivate people first of all with purpose right when you're in the public sector your client is the public and we had an incredible uh mandate but but when I joined agency was not really living up to its full mandate and um at the risk of sounding totally IM modest one of my proudest moments is what New York State Housing Finance Agency is today and I think I set the groundwork to say first of all let's lean into our mandate which is affordable housing we were doing 802s at the time which is nothing wrong with that we had to do those deals to be able to do the affordable but we started doing affordable and we made money doing affordable and we would reinvest them in new affordable deals and it was during the crisis where the agency leaned in that's when I first met Fanny May um was in the GFC I think the state saw the struggling homeowners in New York state I mean New York state is just you know you have Buffalo and there's a lot of home ownership and struggles there and um so that mission really is a rally and cry to bring a Workforce together um there's this uh there was this one very senior leader at the agency um who told me one day I told my wife I've never worked so hard in my life but I'm having so much fun under you so it says I that's another lesson I've learned from government that with the right leadership the right um purpose and that's true in the private sector too and frankly true and Fanny May I mean I am amazed at the commitment of are 8,300 employees I mean we come to work every day to do the best we can to serve the housing needs of the United States and we do it with great integrity um and I think that that's why our engagement scores are so high as well because we it's very tangible that's another thing I love about our work it's very tangible right it's about people but you could actually go and feel um the projects the homes that we finance and it makes it very real for people so purpose and Mission and profit to me this the same case an Enterprise an Enterprise where that we were that rare social Enterprise that made money to do good and there's nothing wrong with that if anything I have learned through all these roles that real Innovation happens at the intersection of mission and profit and um you try to do the best you can to to try to maximize the two so um another person that you and I happen to both know quite well is Jamie Diamond you got the opportunity to work with Jamie for a number of years what what did you learn Leadership lessons in JP Morgan. from Jamie while you were at JPM from either a leadership or a credit management standpoint wow so um an amazing leader so what I learned a lot from him uh first I've learned from him he treats everyone the same so what you see is that is who he is um so that's something I I really valued in him um Jamie's the one who hired me and um it was amazing how he just I still remember our interview he said things that only Jamie Diamond could say he's like okay so he asked me all these like questions he's like okay works hard grew up in Brooklin renter like he just went you know Columbia ivva League partner like he just calculated all this in his head so he could see Talent he stretches people uh but what I really really have learned from him is um risk management I didn't know that if if you run any business for Jamie Diamond you do not realize he's making you into his manager and it's end to end it's all Stripes of risk he the place is naturally paranoid like it is you know when you're at the top you have to be paranoid and he constantly reminded us that you could always be better more efficient better and always do the right thing so um you'd always say this quote um he would call people and say would you sell this product to your mother and he genuinely mean it so I I just I just think um he's just an incredible leader um it's amazing what he's done with JP Morgan and by the way amazing leaders there all under his toled so I learned a lot from him a lot I will say your point about amazing leaders one of the things that I've consistently been super impressed with is the the the senior leadership team at JP Morgan is so Broad and diverse I mean I look you and I both engage with lots and lots of financial services institutions that talk about it you walk into JP Morgan and there is such a diverse senior man when I mean senior the most highest ranks of JP Morgan uh are and the backgrounds are so distinct and it's just such a incredible culture as it relates to thinking about ideas and being willing to challenge one another's ideas and I just you know we do a lot with them we do a lot with other Financial Service institutions I'm not trying to throw anybody else under the bus but I think Jaime's focus on getting just the best and the brightest around him no matter where they come from what they look like what their background is has just been such a huge benefit to JB Morgan for sure and and for sure and at this level of humility I mean they know they're good but they don't again they said they're paranoid um which keeps them really strong also his level of to detail his attention to detail so I still remember my first Business Review with Jamie so even though my business was a small of the 35 businesses he's still he's so disciplined and once a year I would have to defend our business in front of him holy cow I mean he he like he would he reads materials he asks the tough questions and always one step ahead of you it makes you better as a leader I'm forever grateful Tim as a The transition from JP Morgan to a smaller company. quick aside I was looking at your earnings from Q2 and saw that you made $4.5 billion do which is a big sum of money and I was like I wonder how that kind of just fits into like what JPM made in Q2 so JPM made I think 19.6 billion in Q2 okay so you know 4.5 billion is a huge amount but 20 billion is also a somewhat larger one but then I was trying to figure out what 4.5 billion of earnings for you in Q2 measured up against and so I just put in a search that said 4.5 billion Q2 earnings and the one thing that kept coming back was that meta lost $4.5 billion dollar in Q2 on their investments in the metaverse in their virtual reality world and I was sitting there going like what a luxury to be at Facebook and be able to invest four and a half lose four and a half billion dollars on the quarter of just investing in the metaverse of whatever Mark Zuckerberg's Future Vision looks like wow that's a number it's really quite something um so you go from JPM this is sort of like when you went from White and case to the state of New York you're at JPM you're doing big deals you run two of their big real estate businesses and you leave to go run Enterprise which by the way talking about mission is one of the most Mission driven companies nonprofits in the country with that said you go from all the balance sheet and influence that JPM has to a relatively very small Enterprise play on words there um what was that transition like Priscilla as it relates to going from the perch you at at JPM to going to a much smaller um company that didn't have any of the same resources that you had when you were at JPM yeah um so I think back to probably Mission and purpose um I I loved my time at J JP Morgan I the first business I ran there was their Community Development Group um which was affordable housing construction lending litech stuff um then I went on the conventional side and this is not a comment on JP Morgan um but um it was the full real estate business so it no longer was just about project finance and doing deals it was also about selling treasury products and um drisk in the balance sheet so it was not about deals it was because this is you know JP Morgan was calling a recession back in like 2015 2016 so um so at some point you are actually right pmic and a couple other things to cause it but at some point you're actually right right um so again I learned a lot there um and I had an amazing team there and it was a national team and very customer focused but it became harder to service all your clients so we worked with the cream of the crop developers and and sponsors and we wanted their full Rel relationship not just giving them balance sheet but we wanted treasury Services we wanted their um Investment Banking Etc so um it was probably 2018 um I just uh thought if opportunities came up I got a call I wasn't looking for a job but I was on the board of Enterprise as I mentioned um I got a call from roniger who's their board chair and said we're looking for a CEO and I gave them names um he called me back 10 months later I got to call from Shank if you know sha are folks that you probably know and col said we still haven't found someone I'm like well what are you looking for and all of a sudden I became the candidate and and that's how I ended up an Enterprise I wasn't looking you pulled the Dick Cheney you pull the dick CH that's what everyone says yes and the these were you know Ron and Jonathan Rose and Shay Carr we had served on the Enterprise board together so they knew me by and they just they knew which like which strings to pull and uh and I have to say it was an unbelievable experience experience it was during the pandemic I learned a lot from Enterprise as well from the workforce as a leader um it's it's a very unique organization um and it was during leading any organization during the pandemic U was something that was I think every CEO remembers why is it so hard to build affordable Why is it hard to build affordable housing? housing why is it so hard look it's um there is an affordability crisis right um You have uh rents going up higher than income same thing with home prices you have um today if you look at renters as you know third renters are paying more than 30% of their income on rents it's all comes down to numbers right um it builds you know you need land it costs money you need land you need the financing and you have to the rents you have to charge the rents and to keep it affordable for today's households is not easy so it's a combination of land it's financing it's nimi is very real when it comes to low-income housing I saw a lot of that um at Enterprise um we're seeing it today so it just there's a lot it needs all stakeholders together to have the courage and the willingness to build more housing and that's ultimately I think what we're seeing now in this country I mean supply has been an issue for a long time since the the GFC but it's really coming to roou now given um the affordab we we are in an unprecedented time of unaffordability in this country and given the amount of both The need for local and state level collaboration. Capital that Fanny and Freddy supply to the Housing Industry the amount of capital that HUD supplies the amount of capital that litec supplies it it seems Priscilla like you know there's a lot of capital in Washington to kind of if you will put to housing and housing affordability but that the real disconnect is at the local level on land use management and on entitlement have how do we how do we solve that disconnect and I and I want to give equal airtime to both C presidential candidates now did not seem like we're talking about just one but I will say that the Harris campaign's proposal on housing to build 3 million new homes is an actual concrete proposal that from my personal view is much better than the rent control proposal that the Biden administration had launched previously in the summer um and then on the Trump side it appears that the housing policy from the Trump campaign is a enforce illegal immigrants and push them back to their home countries therefore freeing up additional housing and then also bring interest rates down by being more activist as it relates to Fed policy that's those are the two stated policies from housing I want to focus on the Harris one for a second though here because if the idea is to build three million new homes um there does seem to be a disconnect between the capital that sits in Washington and the policy at the local and state level any thoughts on how to sort of kind of marry up those two things to try and actually get to a proposal that the vice president Harris's campaign is putting forth look you know I'm I'm not here to aine on any proposal I will say I'll confirm you're right I mean there are estimates out there we have a shortage at our economy is say three to four million homes in this country we're we're building at a rate that you know when you look at net new household formation and what we're building there's there's a huge supply demand and balance so we need more homes and you're right it is a local issue so again this is where having worked at the state level level um you really need the integration between federal policy and the local policies because it's real and you know how do you create incentives to align the two um that's the challenge and I mean we're trying to do our part um when it comes to supply you know on the single family we you know we we have less tools at Fanny May when it comes to supply per se um on the single family side um to the extent we have Aro for closed properties we're repairing them to a high standard standard we're selling them to low income and moderate income aspiring homeowners giving them a 3% uh discount um we're also on the multif family side and trying to preserve or create more housing out of existing housing is we're working with sponsors from the conventional space to dedicate some of their units for uh individuals at 120% of Ami or lower so we're trying to create you know we have to all be very creative that it's yes we need new units but we also have to preserve the units that already exist and it really is all hands- on Deck but it's that coordination of um all levels of Co government it's Federal it's state and it's local as well and I mean in some states you have county level as well um and um understanding that everyone has to give something to build this housing but the numbers have to work as well for developers right I mean developers are not going to build if the deal as we say in real estate doesn't pencil out right so costs are becoming more expensive you know if you think of inflation labor cost is more expensive materials are more expensive um so it's I think if Government were to put subsidies they have to get something in return and usually it's some kind of rent restriction um in the case of single family uh you know Fanny May we're trying to do our part uh we have a 3% down payment um Home Mortgage product and uh for low income and moderate income we have down payment assistance and close and cost assistance so we're trying to do what we can but it really does take coordination at all levels of government and Priscilla given and I I Managing multi and single family homes. asked this question from a 30,000 foot level to get a sense of how challenging it is for you to run an Enterprise that is so integral to this whole the whole daisy chain of all the influencing parties and yet at the same time you're sort of in The Penalty Box and not allowed to really engage from a political standpoint and yet at the same time you're also not allowed to be just a you know if you will a freewheeling public company and and private Enterprise how that's a very sort of I would imagine a very challenging Balancing Act to to be in the role that you're in particularly I mean you've got four what what is it you have $4.3 trillion doll of assets something like that yeah 4.3 you're buying one out of every four home mortgages America homes and we're about 20% of the multi family of the multi of the multi market so one out of every five on the multi side and one out of every or on the single family side and yet you sort of you you're you're kind of boxed in because you can't fully engage on the policy side given what's happened with Fanny and Freddy and conservatorship and you can't just run as a private Enterprise that can go do kind of whatever they want to do H how do you manage that it's got to be wildly challenging yeah look Ching makes it fun right so uh we work very closely with our regulator regulator fhfa we work very closely with our board and I would say we're doing an incredible job um in this situation you know we are true to our mission we provide liquidity stability and affordability we're leveraging technology to let us do what we think needs to be done to make the system more fair and sustainable for everyone so I would say yes there limitations but we do the best job we can and work very closely with um the federal Housing Finance Agency we have a tremendous director running fhfa who cares about has hous and she's passionate about low and moderate income families so I would say you know again I've only been to Fanny May it's going to be a little bit uh almost two years and so far I would say we're highly engaged uh we're reaching out to stakeholders we're you know we like to say at Fanny May that we listen we lead um and we do listen to many stakeholders look we said stand standards I mean we don't like to say it so strongly but we set standards whether it's for mortgage credit and multif Family Credit Now multif Family were only 20% of the market but in single family as you say we one four you know um I think it's something like 70% of mortgage applications go through our desktop underwriting system that lenders throughout the country use so I think we have a huge responsibility to ensure that um access to credit is fair um and I think we doing a pretty good job you know even even in the slow Market um I think this year I think we're at like over 187 billion of liquidity combin you know single family multif family um more and more we're very leading in into firsttime homeowners so I would say that despite um the challenging markets in both single family and multif family uh we're serving the market as best as we can I I hear you run through those numbers and they're super impressive Fannie Mae’s positive transformation and innovation. like the the the the net worth out of your Q2 financial statement the net worth of of of fanny has just continued to go up I think net worth has gone from 47 billion to 60 billion to 77 billion you added another 9 billion in the first half of 2024 so you're up to 86 billion do of net worth how how much messaging needs to be done as it relates to the safety and soundness of Fanny and Freddy after 2008 and them going into conservatorship and sort of all of the um not not only the you know the 190 billion that was required to bail Fanny and Freddy out at the time has been not only returned but then you all have added another hundred billion dollars it's been the best investment the US Federal government's probably ever done um how much how much is that part of your mandate to make sure people understand what's going on from a safety and soundness standpoint or does you just have to sort of let that take care of itself yeah you know so it's a great question and this is where um I don't know if it's my mandate but it's my personal mandate I don't know if I have the Mandate but I have to say um people often ask me what has surprised me the most about Fanny May Since I've joined because I've worked with Fanny May this is I said in all my past four jobs I worked with both Fanny and Freddy so I knew the Enterprises the number one thing that surprises me the most is even within our industry that people do not understand how substantially transformed fny May is I mean our business model is completely different right so how we made money before the GFC and how we make money today we it was an Investment Portfolio it was a retain portfolio today it's a guarantee like we we we buy loans we sell them all so that's very different we have different lending standards right the products the 30-year fixed rate mortgage that makes up that 3.6 trillion though that's a that's a plain vanilla product as it should be and that's that's where our book is today um when you look at um what we've done with capital when we started retaining earnings in 2019 I'm amazed that people in our industry don't know that we've been retaining earnings you know since 2019 and now 87 billion we have a capital Rule now now one could argue yes are we still under capitalized for sure but can we run the business knowing that's the regulatory Capital that we have to hit so it's a completely transformed and by the way the loss mitigation tools that we have now did not exist I mentioned I first met uh Fanny May uh during the great financial crisis the Enterprise didn't know what to do with struggling homeowners fast forward during covid I worked with Fanny May again when I was at Enterprise in two capacities one for homeowners but also we had a dust license right do Bell weather Enterprise holy cow I mean talk about transformation they were able to respond to the pandemic that story hasn't been told 1.5 million households kept their homes because of what Fanny May did and by the way like 99% have been resolved so the muscle we have the business model we have there's a lot for our people to be proud of and there's one thing I do while I'm here is to try to close that perception Gap and it doesn't care for in conservatorship out of conservatorship it is a different business today it's a well-run business it's risk-managed it's govern governed well we have an incredible board of directors and I'm going to keep telling that story for as long as I'm in my chair so talk for a moment then on that The benefit of a long-term fixed rate mortgage. same theme as it relates to the benefit that Americans have today of having a long-term fixed rate mortgage so the numbers that I think you talked about in earnings call was that 80% of American homeowners have a fixed rate mortgage under 5% and one of the big differences between the US economy and other economies developed economies around the globe is that if you live in the UK you've got a typically a fiveyear floating rate mortgage on your home and it might be a 10-year mortgage but it's certainly not a 30-year fix trade instrument we're we're incredibly blessed to have the secondary mortgage Market in the United States that we have but it's been one of the big sort of untold stories about why we've come through this sort of great tightening where the consumer still had cash to go out and you know to go back to the Movie Trading Places with Eddie Murphy and Jamie Le go out and buy the Kung the GI Joe with the Kung Fu Grip as Eddie Murphy famously says in that movie but that people could actually go out and spend money and that that in other developed economies I mean we our GDP growth has been so much greater than that of Japan and the UK and Germany and one of the main reasons for that is that people as rates went up weren't paying more for their home mortgage it was a fixed expense and not a variable expense and that's all due to the secondary mortgage Market that Fanny and fetty provide yes so there's a lot there um so even just taking a step back I think that it's just part of our as a country it's part of the American dream right 1938 was part of um you know the New Deal and uh that's how generational wealth is still built in this country and that is just like apple pie whatever that expression is right so that 30y or fixed rate mortgage and it is very unique to the United States but another key Point you're mentioning and this is why we at Fanny May talk about we don't yet I know we all focus on the 10-year for mortgage rates um and because it is a very important component of how the mortgage rate is built but the other thing is what you're touching upon is the investors we have a highly sophisticated Capital markets when it comes to mortgage Finance in this country so when you think of the fixed income Market you have us treasuries you have corporate debt and you have mortgage back Securities it's incumbent on Fanny May given our business model today which I mentioned our model today is we buy mortgages we put them in the TBA Market we sell this we have to make sure that our investors like the mortgage back security because that is where the liquidity comes from that is our liquidity one thing I've learned at Fanny May two years is we're so focus on the primary Market the liquidity Market is key and therein lies a big question mark because who during a GFC till today who were the biggest buyers of mortgage back Securities it was the Fed and they're not buying anymore they're just rolling off their portfolio it was the banks and they've taken the step back as they wait for Bank regulatory Capital to be resolved so it's money managers so we're very lucky that money managers today today this point in time are overweight mortgages but that same money manager has options they have a choice they could buy treasuries they could buy corporate debt so I think one thing that I've grown to appreciate which I didn't before I joined Fanny May is how important it is for us to understand how important for all of us to understand that anything we produce any new product that we produce it has to be something that we could sell to an investor because it is key to that liquidity and the stability in the market is to have that Mor that investor and we sold and when you think of mortgage rates you know again we focus on the 10 year the 10 years were like at 38 today or around there but mortgages now they've come down so like at 63 there's about 40% of spread and that spread doesn't get talked about enough and that spread to a very simp the most simple way to describe it there's the investor they have to get paid for that um that ability of the consumer to prepay their mortgage it only exists here right so here they think they're buying an MBS that could be out for 30 years instead it gets refi the minute there's a bond rally so they got to get paid for that duration risk they take but the other piece is Originators they too have to get paid for originating mortgages so I think um us Fanny May just raising just putting a highlight more on on what makes up mortgage rates because there's so much focus on mortgage rates they have come down from even a year ago even from August um I think education and just that transparency is good for the system because we that end to end the primary all the way to the MBS investor and you know one of the things we do is we bring Capital the us but also foreign Capital most people don't know that that our mortgage back Securities it's a I think the MBS Market um it's probably like I don't know the the mortgage Market is probably 13 trillion 14 trillion the ABS Market's probably 10 trillion that's coming from us investors as well as foreign investors and that's part of our job is that liquidity is key which I did not appreciate until I joined Fanny May so given that 80% of us Why not provide second mortgages to single family? homeowners have a a a 30-year fixed rate mortgage under 5 % the chance that they're going to go and refi that um that's neither here nor there as it relates to when where you think rates are going to go I'm not going to ask you to opine on that but there's a lot of there's a lot of Trapped Equity inside of the US single family um Market why not provide secondary mortgages to allow people to add leverage when those fixed rate mortgages are at such a low level why wouldn't why wouldn't we do in the single family space what we're able to do in the commercial space yeah so first of all I'm okay to aine on mortgage rates um that's our economists do come right at it come right at it are they going down and what and and and are they G and is there going to be a a rotation out of um uh uh money market funds which I think right now has $6.7 trillion doll into longer duration as the FED fund rate comes down and therefore bring down the two-year fiveyear and tenure well that that's probably way more sophisticated for me to respond but um our economists were more conservative than others out there so we think you know there's probably two rate Cuts one in September one in December 25 basis Points each that's where we see the fed's fund rate um and we have reasons for that right the economy is is still growing it's slowing down but it's still growing you know unemployment still has a forehand and if you're in real estate you know that in construction you need more that there's you need more labor and inflations come down but it's not at that 2% that that chairman pal has said he so want so um we have taken a more cautious view as it relates to mortgage rates uh we do think that rates will come down but they'll still be in that six handle this year you won't probably see them go down south of six probably to fourth quarter of 2025 and a lot is what you're describing it's that lock in effect so right now we're seeing uh there there's this real disconnect between buyers and sellers right now and single family so the the aspiration to be a homeowner remains very high it's like our our last survey I think something like 92% of non-homeowners aspire to be a homeowner but yet only one fifth think it's a good time to buy a home you flip to sellers they think it's a great time to sell a home because they're seeing these high home prices so when you couple the lock in effect as you said 80% of consumers today have a mortgage that is a 200 basis points uh lower than current rates uh you have a lack of inventory so that's why we think rates we you know we we don't know that the consumer sees even though the home prices have come down the pace has come down the consumer still sees high home prices and the consumer still remembers when mortgage rates were at the 3% just a few years ago so I think they're going to stay up there six and maybe people transact at six um but they're not going to come down real fast and that's probably what consumers are waiting for and so um let's shift for a moment to The challenge of deploying capital for multifamily. multif family yeah um the multi- business we've been blessed to be your largest partner for eight of the last 10 years have an incredible partnership between our two companies um the originations that both Fanny and Freddy did in 2023 were well below what the regulator has as a as a cap on originations for Fanny and Freddy and then this year Freddy's volumes through the first half of the year are up about 20% off of a very low 23 and Fanny's volumes were down why is it that fanny has um had a tough time deploying capital in this market on the multif family side I think you forgot a very important fact so in 2023 the market was way down I think the market was like 246 billion compared to in the 2022 I had like a four something billion right so um Fanny May continues to be we've always been that 20% of existing market so that was the case in 2023 and this year we're on track as well to be about 20% of the market so I'm not sure what numbers um you might be referring to but um we look at our pipeline very closely and um what we have found is that today as you know better than me you now have competition from non-traditional lenders you know you have cnbs has come back and you know we we do acknowledge that the market is slower right people because of rates right I think until that Clarity is there so all all of us we just haven't seen the same level of transactions but we're quoting deals and we're finding many of the deals we quote go away they don't happen but when I look at our numbers yes you're You're right our cap is 70 billion we'll probably be inside maybe more close to what we were last year but we're still 20 to 22% of the total market and I think that's a very important fact so you have to look at Absolute numbers and the percentage as well because we have competition right um and and you know one thing that that um we talk a lot a lot at Fanny May is we are very committed to the delegated model and personally I think it's fantastic that sponsors have different options that they have our model they have Freddy's model which is a very different model they have cnbs they have Bank Capital they have life codes that's good I mean I'm again I'm a former JP Morgan Banker it's good to have different options as a sponsor but we I hope where we get to at at Fanny May is you know we acknowledge we should just talk about the elephant in the room about how things are slowing down you know we are very committed to the delegated model but the world has changed a little bit for us um this past year and as when you think about fraud I don't know about you Willie but you know 18 24 months ago we couldn't imag imine some of the fraud that we've seen in the industry so yes we've had to slow down a little bit um we we are doing more we are doing more inspections we do have to get to the root causes yes we're doing more we're asking our lenders to do more and frankly you should be asking your sponsors to do more because they should be worried about tenant fraud so I think right now our industry is in a point where it's a great industry you can't have fraud we all have to get better at detecting it knowing how to do so to you know to bring the activity back because there's a lot of Tailwinds for multif family right now um when you look at demographics um where you look at you know the supply that's coming on it'll clear through the system you know 2026 2027 might be an amazing year for multif family um we think um in terms of valuations that we're probably at the at the end right so like our economists say you know like a 25% Peak to trust off we're probably I asked them where are we how close are we to that 25 and they're like probably about 20ish or so so I think when things settle down but we got to tackle this fraud issue because our ultimate goal is to lean into our delegated model so that folks like Walker Dunlap could provide the certainty that sponsors are looking for but we're going to need your help and um I think it's incumbent on all of us um to commit to do that so I think there's a lot of myth about what we're not doing and doing but when I look at the numbers where still delivering about 20% of capital for multif family yeah um and I Fannie Mae's business model. don't want the uh I don't think there's a lot of myth in there I think that the issue the numbers are the numbers as it relates to caps non-aps and where you all are from a competitive standpoint as far as volumes I think your comment on on fraud is a very important one there's been it's been widely reported there was a Wall Street Journal article you know two weeks ago I have said numerous times that that Wall Street Journal article should have been read written a year ago because it's been the past year that Fanny and Freddy and the regulator and partners like Walker and Dunlop and all of our competitor firms have been really diving into this issue with you all to to to root it out and to figure out where it has been and uh to try and make sure that the the information sources and the policies and procedures that are around all that are robust enough to make sure that we're catching it um I think the other interesting that you pointed out Priscilla is that the difference between the fanny made dust model and the Freddy ma optigo model in the sense that you've got the dust lenders out there doing the underwriting taking the risk and holding the risk in the mortgage loan therefore if we do have fraud um you know it's we're the ones if there's a loss on it we're the ones taking in Walker null position the first loss versus some of our competitor firms have Perry puru with with Fanny May on the Freddy Mack side where it's non delegated it's there's a big question mark As is it Walker doops or responsibility to catch the fraud is it Freddy Mack's responsibility to catch the fraud or is it the bpce buyer responsibility to find the fraud and the tape when they're buying the First lost position and should it go back to the bpce buyer I think the Fanny May model is a much clearer if you will chain of responsibility from an underwriting standpoint versus the Freddy Mack model where we co- underwrite the loans with Freddy Mack and it's sort of like should you have caught it should we have caught it should the bpce buyer be the one to pay for this so it's very interesting as The Regulators working with both you and Freddy Mack to figure out how to a put in the policies and procedures to deal with this effectively going forward and second of all on those deals that do have fraud which has been widely um uh reported upon sort of who ends up paying for it and it's a it's it's an important issue right now as you as you correctly underscored yeah look I I can't comment on Freddy's model I can comment about Fanny May's model and you hit it on the spot I mean our model the delegated model exists exists because of the alignment of Interest right we are in it together um so it's it's the delegation it's also the life of Loan Servicing so when something does go wrong in our delegated model we know exactly who to call we go to the sponsor directly so it is a very different model but it is important for sponsors to have different sources of capital as well but this broad issue really is an industrywide issue and we're working very closely with fhfa on it um as well but yeah in the meantime you know we we the cues are longer we acknowledge that we don't like it I'll be honest we don't like it we wanted you know we want to delegate more and get back to a day where you have the certainty that you need so that you can deliver that for sponsors and and as you know we we are all ears on that one and we and obviously have a great partnership uh Priscilla's mission as a CEO. behind that um final question Priscilla you've been very generous to your time and thoroughly enjoyed our conversation um coming to Fanny May is based for you yeah you came because of the mission of Fanny May you came because of your your dedication to housing and and providing safe affordable housing to Americans um what's mission accomplished from Priscilla's standpoint as it relates to improve safety and soundness getting Fanny and Freddy out of conservat you only have Fanny but getting Fanny out of conservatorship and back as a as a as a uh a public company or something else that's outside of it that I don't know might be the mission that you have as it relates to your tenure CEO well one is the perception gap of fny May telling that story is number one number two is continuing to lean on our mission I mean we didn't even get to talk about what we're doing about increasing access to Capital and the credit invisible and how we're using technology to see more people to serve more people holy cow we're just getting started with what we're doing with on time rent payments now we're doing cash flow underwriting now we're saying holy cow there's about 30 million people in the gig economy are we looking at their cash flows so my hope is that I could continue to help Fanny May to build on the work that's already started and using technology to allow us to look at borrowers and renters in a safe and sound way to provide access to credit like those were my parents like like I get so much inspiration from you know people who are not seen by the system and we could help do that and technology is helping us and then the third thing is you know I'm also an operator I love running the operations and working with our cyber people our operations people our RIS people it's a really fun place to be there's a lot of energy 8300 we're all like we come to work every day everyone is a change maker at Fanny May and um that just I just draw a lot of energy from all of that well given Fanny's role in the Housing Finance system as well as the partnership that we have I'm very thankful that you're in the seat that you were in and I'm also thankful that you joined me for this conversation um thanks Priscilla it's great to see you and thanks for all you do thank you thank you and congratulations again thanks very much have a great day everyone thanks for joining us [Music]