Debby Jenkins, senior vice president of underwriting and credit, Freddie Mac Multifamily
Debby Jenkins, senior vice president of underwriting and credit, Freddie Mac Multifamily

Deborah Jenkins knows what it’s like to be living in the missing middle.

Born and raised in the suburbs of Detroit, Jenkins, who begins 2019 as the new head of multifamily for Freddie Mac, was the first person in her family to go to college (on a Division II softball scholarship to Wayne State University) and worked in mortgage banking and securitization at Wells Fargo during the early stages of the financial crisis. She didn’t leave the Wolverine State for the Beltway until 2008.

Jenkins was originally tapped to become head of Freddie Mac Multifamily on Jan. 1, 2019, but instead took over the job on Nov. 5, 2018, when her predecessor, David Brickman, became Freddie Mac chief heir apparent to retiring CEO Don Layton. As she assumes leadership of Freddie’s multifamily platform, the government-sponsored enterprise (GSE) is innovating its approach to housing affordability—if not affordable housing per se—and seeking to provide greater capital liquidity for financing “missing-middle” assets that aren’t Class A but aren’t under the larger umbrella of subsidized housing, either.

To catalyze growth in both new and existing markets, Freddie is also embracing a digital and cultural transformation to keep pace with a more tech-driven and energy-aware borrower. With innovation, technology, and affordability top of mind, Jenkins sat down with us to share her thoughts on life before Freddie Mac and where the GSE’s multifamily division is headed in 2019 and beyond.

MFE: Is it true that you lived your entire life in Michigan until joining Freddie Mac?

Jenkins: Yes, I spent the first 40 years of my life in Michigan. My parents still live in our house in suburban Detroit and witnessed the house next door sell for $12,000 as a result of the housing recession. The area I grew up in was and still is a blue-collar upbringing and lifestyle, and we were there until 2008, when I was working commercial real estate at Wells Fargo with the CMBS markets virtually frozen and was afforded the opportunity to join Freddie. We moved the family to D.C. at rock bottom of the financial crisis.

MFE: What was it like in those early days trying to wrestle liquidity back from the depths of the recession?

Jenkins: Freddie was just starting the K-Deal initiative, which in 2008 was still just an idea. David Brickman was running capital markets at the time, and I came in to start the underwriting platform. We took it from zero as a pilot to the first K-Deal in June of 2009, and hit conservatorship in 2008 in the interim, so we were fortunate that the business literally shot forward from there.

MFE: And now you’re taking over for Brickman as head of multifamily. How has your shared history eased the transition?

Jenkins: In early September 2018, [then-CEO] Don Layton announced his retirement, David was positioned as our internal candidate for CEO, and I was announced as incoming multifamily head. There was going to be a three-month transition, but very quickly we realized David was more ready to take over the entire company than was anticipated, and, likewise, I’ve been here for the past decade.

It’s fortunate we acted on it rather than waiting, as I get to hit the ground running in 2019 after having close to a quarter of leadership under my belt. I’m also fortunate to come onto a platform that is innovative and embraces creativity. We were the pioneers of risk transfer a decade ago that the entire housing industry is now following, and we’re known as problem solvers as much as for our certainty of execution. Those are luxuries I have that don’t necessitate big changes.

MFE: That being said, what’s top of mind for the first 90 days? What will be immediately in focus at Freddie Mac Multifamily?

Jenkins: The top priority for me is digital transformation. Freddie Mac has embarked on a four-year program for evolving the way we do business. Not just a technology initiative, it’s a strategic imperative we need to complete successfully in order to stay in the leadership position we’re in. The commercial mortgage origination process hasn’t changed in 30 years, and there needs to be consideration for the use of artificial intelligence and machine learning in getting faster speed to market. We’re looking at how we can focus on analytics and operate more efficiently with an aim to working smarter and faster from the day the loan walks in the door all the way to securitization.

We’re all learning together and trying to understand how to take advantage of new technology and concepts, from micro-loans to micro-units.

MFE: Is multifamily finance really ready for applied artificial intelligence?

Jenkins: The speed at which new technologies are deployed is becoming exponentially faster in multifamily real estate, so, in that sense, the industry is ripe for that kind of transformation. The newer generations are utilizing technology in ways [other generations] haven’t, so we’re talking about transformation that isn’t just top-down from leadership but a bottom-up uprising of talent, as well. We’re all learning together and trying to understand how to take advantage of new technology and concepts, from micro-loans to micro-units.

MFE: How is the DNA of your borrowers poised to changed?
Jenkins: I think the construct of the typical borrower changes with market conditions, with interest rates, with yield curve, with opportunities for growth, and with renovation and rehab opportunities. Over the course of the past several years, with interest rates so low, floating-rate product has been a very popular pathway for institutional and private-equity players to see higher cash on cash returns, fueling large, billion-plus transactions and acquisitions of platforms. Now, many of the funds with three- to five-year holds are starting to become sellers simply based on their structure. It creates opportunities for new entrants in the market that have been sidelined, and with the flattening of the yield curve you also get renewed interest in seven- to 10-year fixed-rate loans that suit a different borrower demographic, as well.

While we’re still bullish on multifamily, the fundamentals over the next few years face a slower pace of growth.

MFE: In what ways does Freddie Mac need to stay flexible in order to meet changing borrower dynamics?

Jenkins: It’s been a period of rapid growth over the past five years in multifamily, and while we’re still bullish on multifamily, the fundamentals over the next few years face a slower pace of growth. What that does is give us the ability to enhance the digital infrastructure and evolve the way we’re doing business for stronger product innovation. Everything we’re doing points to a mission of serving the missing middle and helping renters with the cost burden of housing. We’ll need market discipline backed with creativity as we move through this next cycle.

MFE: And how can Freddie Mac Multifamily play a role in supporting low- to moderate-income families, particularly when the concept of “affordability” is a vague term that changes from submarket to submarket?

Jenkins: The concept of affordability with a capital “A” has some sort of rental subsidies from the government. Then, you have the luxury Class A phenomenon, and we talk about supply; the missing middle is everything in between. That’s how workforce housing came about in the first place: It was to address the cost burden of housing in terms of rent versus homeownership as expressed by a percentage of personal income. For years, the assumption of affordability was to pay 30% for housing, but people are paying well in excess of that now, and it’s become a national issue. That stems from a lack of supply in the middle markets, and we’re aiming for 90% of what we do to help build that supply by ensuring liquidity in the market.

MFE: Anything else that’s important to an understanding of where Freddie Mac is headed in 2019 and the years to follow?

Jenkins: In 2019, it’s important to emphasize that this is the next era of multifamily at Freddie Mac, with all of the leadership changes. Both GSEs will have new CEOs in 2019, and there’s new leadership in the multifamily space and evolution in the industry overall. Hopefully, those changes are positive given our platform, our model, the way we work, and the creativity, from a people standpoint, that keeps us ready for whatever comes. If there is GSE admin reform, we welcome that, as well. We’re looking forward to adapting and continuing to be proactive with technology to be more nimble, making sure we retain the right balance of innovation and transformation along with discipline.