Commercial Magazine

Nancy E. Wallace, Berkeley

College programs do more than educate future mortgage pros

By Neil Pierson

Despite predictions of a possible recession in the next few years, the mortgage industry continues to hire more people. According to the Nationwide Mortgage Licensing System (NMLS), the number of mortgage originators grew by 8.9 percent last year, to more than 158,000.

Many of these originators work exclusively with residential mortgages, but the 2017 growth figure also likely indicates that there is an expanding number of originators involved in the commercial mortgage industry as well. And demand for skilled professionals means colleges and universities need to find ways to create and educate the commercial mortgage brokers of tomorrow.

Nancy E. Wallace, co-chair of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley, spoke with Scotsman Guide about the role a major university can play in preparing the next generation of real estate professionals, and she also discusses the research pursued by a university that can inform the mortgage industry as a whole. 

What are the educational needs for the commercial real estate industry? Are there enough young people looking to enter the field?

That’s a very good question. The universities across the U.S. have different kinds of models in terms of real estate education. Many of them, especially the big state universities, have large intro classes on real estate.

I’m finding that [real estate finance] firms are really keen on hiring undergraduate analysts that have this really deep understanding of the capital markets. Because just knowing mortgage math and knowing the difference between an adjustable- and a fixed-rate mortgage, and maybe knowing something about the CMBS (commercial mortgage-backed securities) market, really isn’t enough for some of these institutions.

I partner with firms all around the country that will bring in their deals, and then we very carefully dissect these deals so that my students really understand contracting and reading contracts. 

Are continuing-education opportunities for mortgage professionals less prevalent on the commercial side than on the residential side of the business?

Yeah, I agree with that. I think that is exactly true. It’s not that I wouldn’t be interested in doing that. … I could envision, in the future, doing something that would be intended for [commercial] brokers. I mean, we certainly have brokerage firms on our policy-advisory board.

We have two public conferences a year, for which real estate professionals can get continuing-education credit, and we’ve done that for a very long time. What we don’t do is specialized appraisal courses, specialized brokerage courses or specialized mortgage-banking courses. 

You’ve done a lot of work with financial data. How is that evolving and influencing commercial real estate financing?

[At Berkeley], we are developing an incredibly large data repository for commercial real estate and residential real estate, including all the mortgages in the United States and all the bonds that are tied to them. We have 72 terabytes of data and we are really going to push hard on having data to inform this industry about what’s really going on.

Once we have this done … I would be more able to have informational meetings for the brokerage industry in terms of what we’re finding — where the risk is geographically, what the differences are in underwriting practices, what the effects of some of these policy decisions have been on the markets. 

You also do research on the CMBS market. How is it evolving?

I think that people are appropriately cautious. I mean, this market basically collapsed [years ago] and there are new rules that are poorly understood. We’re at a different part of the cycle now, where pricing, [capitalization] rates and occupancy rates are of concern.

Anyone that is in these markets where there has been a booming multifamily [sector] heavily financed by either Fannie Mae or by CMBS knows there is room for concern here. And, unfortunately, there are big lags (in reporting data), so what we’re seeing right now is the default rates are plummeting in CMBS. … But [I don’t know] whether or not you should take heart from that, given that right before everything just completely blew out in the CMBS market [last time], default rates had never been lower.


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