The following discussion should be read in conjunction with the historical financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. The following discussion contains, in addition to historical information, forward-looking statements that include risks and uncertainties. Our actual results may differ materially from those expressed or contemplated in those forward looking statements as a result of certain factors, including those set forth under the headings "Forward-Looking Statements" and "Risk Factors" elsewhere in this Quarterly Report on Form 10-Q.

Forward-Looking Statements

Some of the statements in this quarterly report on Form 10-Q of Walker & Dunlop, Inc. and subsidiaries (the "Company," "Walker & Dunlop," "we," "us"), may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.

The forward-looking statements contained in this Form 10-Q reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause actual results to differ significantly from those expressed or contemplated in any forward-looking statement. Statements regarding the following subjects, among others, may be forward-looking:

† the future of the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac," and together with Fannie Mae, the government-sponsored enterprises, or the "GSEs") and their impact on our business;

†          our growth strategy;

†          our projected financial condition, liquidity and results of
operations;

†          our ability to obtain and maintain warehouse and other loan funding

† availability of and our ability to retain qualified personnel and our ability to develop relationships with borrowers, key principals and lenders;

†          degree and nature of our competition;

†          the outcome of pending litigation;

†          changes in governmental regulations and policies, tax laws and rates,
and similar matters and the impact of such regulations, policies and actions;

†          our ability to comply with the laws, rules and regulations applicable
to us;

†          trends in the commercial real estate finance market, interest rates,

† general volatility of the capital markets and the market price of our common stock.

While forward-looking statements reflect our good faith projections, assumptions and expectations, they are not guarantees of future results. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes, except as required by applicable law. For a further discussion of these and other factors that could cause future results to differ materially from those expressed or contemplated in any forward-looking statements, see "Risk Factors."

Business

We are one of the leading commercial real estate finance companies in the United States, with a primary focus on multifamily lending. We originate, sell and service a range of multifamily and other commercial real estate financing products. Our clients are owners and developers of commercial real estate across the country. We originate and sell loans through the programs of Fannie Mae, Freddie Mac, the Government National Mortgage Association ("Ginnie Mae") and the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (together with Ginnie Mae, "HUD"), with which we have long-established relationships. We retain servicing rights and asset management responsibilities on nearly all loans that we originate for GSE and HUD programs. We are approved as a Fannie Mae Delegated Underwriting and Servicing ("DUS" ™) lender nationally, a Freddie Mac Program Plus™ lender in seven states, the District of Columbia and the metropolitan New York area, a HUD Multifamily Accelerated Processing ("MAP") lender nationally, and a Ginnie Mae issuer. We also originate and service loans for a number of life insurance companies, commercial banks and other institutional investors, in which cases we do not fund the loan but rather act as a loan broker. Additionally, through our subsidiary entities, we provide institutional advisory, asset management and investment management services specializing in debt, structured debt and equity.

We fund loans for GSE and HUD programs, generally through warehouse facility financings, and sell them to investors in accordance with the related loan sale commitment, which we obtain prior to loan closing. Proceeds from the sale of the loan are used to pay off the warehouse facility. The sale of the loan is typically completed within 60 days after the loan is closed. In cases where we do not fund the loan, we act as a loan broker and service some of the loans. Our originators who focus on loan brokerage are engaged by borrowers to work with a variety of institutional lenders to find the most appropriate loan instrument for the borrowers' needs. These loans are then funded directly by the institutional lender and we receive an origination fee for placing the loan and a servicing fee for any loans we service.

We recognize gains from mortgage banking activities when we commit to both make a loan to a borrower and sell that loan to an investor. The gains from mortgage banking activities reflect the fair value attributable to loan origination fees, premiums or losses on the sale of loans, net of any co-broker fees, and the fair value of the expected net future cash flows associated with the servicing of loans, net of any guaranty obligations retained. We also generate revenue from net warehouse interest income we earn while the loan is held for sale in one of our warehouse facilities.

We retain servicing rights on substantially all of the loans we originate and sell, and generate revenues from the fees we receive for servicing the loans, interest income from escrow deposits held on behalf of borrowers, late charges and other ancillary fees. Servicing fees are set at the time an investor agrees to purchase the loan and are generally paid monthly for the duration of the loan. Our Fannie Mae and Freddie Mac servicing engagements generally provide for prepayment penalties to the Company in the event of a voluntary prepayment. For loans serviced outside of Fannie Mae and Freddie Mac, we typically do not share in any such payments.

We are currently not exposed to interest rate risk during the loan commitment, closing and delivery process. The sale or placement of each loan to an investor is negotiated prior to establishing the coupon rate for the loan. We also seek to mitigate the risk of a loan not closing. We have agreements in place with the GSEs and HUD that specify the cost of a failed loan delivery, also known as a pair off fee, in the event we fail to deliver the loan to the investor. The pair off fee is typically less than the deposit we collect from the borrower. Any potential loss from a catastrophic change in the property condition while the loan is held for sale using warehouse facility financing is mitigated through property insurance equal to replacement cost. We are also protected contractually from any failure to close by an investor. We have experienced only one failed delivery in our history and did not incur any loss.

We have risk-sharing obligations on most loans we originate under the Fannie Mae DUS program. When a Fannie Mae DUS loan is subject to full risk-sharing, we absorb losses on the first 5% of the unpaid principal balance of a loan, and above 5% we share a percentage of the loss with Fannie Mae, with our maximum loss capped at 20% of the unpaid principal balance of a loan (subject to doubling or tripling if the loan does not meet specific underwriting criteria or if the loan defaults within 12 months of its sale to Fannie Mae). We may, however, request modified risk-sharing at the time of origination, which reduces our potential risk-sharing losses from the levels described above. We regularly request modified risk-sharing based on such factors as the size of the loan, market conditions and loan pricing. We may also request modified risk-sharing on large transactions if we do not believe that we are being fully compensated for the risks of the transactions or to manage overall risk levels. Except for certain Fannie Mae DUS loans acquired in the acquisition of certain assets of Column Guaranteed LLC, in 2009, which were acquired subject to their existing Fannie Mae DUS risk-sharing levels, our current credit management policy is to cap each loan balance subject to full risk-sharing at $60 million. Accordingly, we currently elect to use modified risk-sharing for loans of more than $60 million in order to limit our maximum loss exposure on any one loan to $12 million (such exposure would occur in the event that the underlying collateral is determined to be completely without value at the time of loss).

Our servicing fees for risk-sharing loans include compensation for the risk-sharing obligations and are larger than the servicing fees we receive from Fannie Mae for loans with no risk-sharing obligations. We receive a lower servicing fee for modified risk-sharing than for full risk-sharing.

In July 2011, we launched our interim loan program offering floating-rate debt, for terms of up to two years, to experienced borrowers seeking to acquire or reposition multifamily properties that do not currently qualify for permanent financing. We closed our first loans under this program in 2012. We underwrite all loans originated through the program. During the time that they are outstanding, we assume the full risk of loss on the loans. In addition, we service and asset-manage loans originated through the program, with the ultimate goal of providing permanent financing on the properties.

On June 7, 2012, the Company and its indirect wholly owned subsidiary, Walker & Dunlop, LLC (the "Purchaser"), entered into an agreement to acquire CWCapital LLC ("CWCapital"), a direct wholly owned subsidiary of CW Financial Services LLC ("CW Financial"), pursuant to a purchase agreement of the same date, by and among the Company, the Purchaser, CW Financial and CWCapital (the "Purchase Agreement").

On the terms and subject to the conditions of the Purchase Agreement, the Purchaser will acquire all of CW Financial's interests in CWCapital for approximately $220 million, net of certain expenses and adjustments (the "Acquisition"). Of the $220 million, $80 million will be paid in cash from the Purchaser, through a combination of existing capital and financing anticipated to be obtained. The remaining $140 million will be paid through the issuance of shares of the Company's common stock (the "Stock Consideration"). Upon the closing of the Acquisition, it is anticipated that the Stock Consideration will total, and CW Financial will thereby own, approximately 11.6 million shares of the Company's common stock, or approximately 34% of the Company on a fully diluted basis, subject to the adjustments described

in the next sentence. Pursuant to the Purchase Agreement, the number of shares constituting the Stock Consideration is fixed at such 11.6 million shares (and the common stock price at $12.02) within a "collar" of a 30 percent upward or downward fluctuation in the volume weighted average price of the common stock within the 20 consecutive trading days immediately preceding the third trading day prior to the closing date, outside of which "collar" the number of shares constituting the Stock Consideration would be variable based on the price of the common stock. In accordance with the terms of the Purchase Agreement, CW Financial may not transfer the Stock Consideration for a period of 180 days after the closing of the Acquisition.

Pursuant to the rules of the New York Stock Exchange (which require the Company to obtain stockholder approval prior to issuing common stock, if the issuance would constitute more than 20 percent of the total number of shares of common stock outstanding before the issuance), the issuance of the Stock Consideration is subject to approval by the vote of a majority of the shares of the Company's common stock entitled to vote at a meeting held for that purpose. As the Company previously reported, the date of the special stockholder meeting for approving of the Company's issuance of the Stock Consideration is August 30, 2012. The completion of the Acquisition is subject to various other conditions, including obtaining certain regulatory approvals and the approval of certain governmental authorities. Subject to the satisfaction or waiver of the closing conditions of the Purchase Agreement, the Company expects the Acquisition to close by the end of the third quarter of 2012.

Basis of Presentation

The accompanying condensed consolidated financial statements include all of the accounts of the Company and its wholly owned subsidiaries and all material intercompany transactions have been eliminated.

Critical Accounting Policies

Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions that affect reported amounts. The estimates and assumptions are based on historical experience and other factors management believes to be reasonable. Actual results may differ from those estimates and assumptions. We believe the following critical accounting policies represent the areas where more significant judgments and estimates are used in the preparation of our condensed consolidated financial statements.

Mortgage Servicing Rights and Guaranty Obligations. MSRs are recorded at fair value the day we sell a loan. We only recognize MSRs for GSE and HUD originations. Our servicing contracts with non-governmental originations are cancelable with limited notice and as a result, have a de minimis fair value. The fair value is based on the expected future net cash flows associated with the servicing rights. The expected net cash flows are discounted at a rate that reflects the credit and liquidity risk of the MSR over the estimated life of the underlying loan.

In addition to the MSR, for all Fannie Mae DUS loans with risk-sharing obligations, upon sale we record the fair value of the obligation to stand ready to perform over the term of the guaranty (non-contingent obligation), and the fair value of the expected loss from the risk-sharing obligations in the event of a borrower default (contingent obligation). In determining the fair value of the guaranty obligation, we consider the risk profile of the collateral, historical loss experience, and various market indicators. Generally, the estimated fair value of the guaranty obligation is based on the present value of the future cash flows expected to be paid under the guaranty over the life of the loan (historically three to five basis points annually), discounted using a 12-15 percent discount rate. Historically, the contingent obligation recognized has been de minimis. The estimated life and discount rate used to calculate the guaranty obligation are consistent with those used to calculate the corresponding MSR.

The MSR and associated guaranty obligation are amortized into expense over the estimated life of the loan. The MSR is amortized in proportion to, and over the period, that net servicing income is expected to be received. The guaranty obligation is amortized evenly over the same period. If a loan defaults and is not expected to become current or pays off prior to the estimated life, the unamortized MSR and guaranty obligation balances are expensed.

We carry the MSRs at the lower of amortized value or fair market value and evaluate the carrying value quarterly. We engage a third party to assist in valuing our MSRs on a semi-annual basis.

The Provision for Risk-Sharing Obligations. The amount of the provision considers our assessment of the likelihood of payment by the borrower or key principal(s), the estimated disposition value of the underlying collateral and the level of risk-sharing. Historically, initial loss recognition occurs at or before the loan becoming 60 days delinquent. We regularly monitor our risk-sharing obligations on all loans and update loss estimates as current information is received.

Overview of Current Business Environment

Thus far in 2012, U.S. multifamily market fundamentals have continued their improvement following the macroeconomic instability experienced in recent years. Occupancy rates and effective rents appear to have increased based upon increased rental market demand, both of which aid loan performance due to their importance to the cash flows of the underlying properties. Despite this improvement in some

market fundamentals, recovery of the overall real estate market continues to be challenged by the slow recovery of the broader economy.

The passage of Dodd-Frank introduced complex, comprehensive legislation into the financial and real estate recoveries, which will have far reaching effects on the industry and its participants. While we are not a banking institution, there is uncertainty as to how, in the coming years, Dodd-Frank may affect us or our competitors. In addition, the scope, extent and timing of GSE reform continues to be uncertain. Although we cannot predict what actions Congress or other governmental agencies may take affecting the GSEs and/or HUD, we expect some regulatory change is likely. In the interim, the GSEs and HUD continue to supply a significant level of capital to the multifamily market and are expected to do so again in 2012 as commercial and multifamily debt refinancing activity is expected to increase.

Results of Operations

Following is a discussion of our results of operations for the three and six months ended June 30, 2012 and 2011. The financial results are not necessarily indicative of future results. Our business is not typically subject to seasonal trends. However, our quarterly results have fluctuated in the past and are expected to fluctuate in the future, reflecting the interest rate environment, the volume of transactions and general economic conditions. Please refer to the table below, which provides supplemental data regarding our financial performance.

                                           For the three months ended June 30,          For the six months ended June 30,
(Dollars in thousands)                          2012                  2011                  2012                  2011
Origination Data:
Origination Volumes by Investor
Fannie Mae                               $          610,139    $          555,263    $          878,040    $          859,088
Freddie Mac                                         223,291               213,025               307,808               264,431
Ginnie Mae - HUD                                     97,317               282,269               209,920               364,585
Other (1)                                           406,235               258,825               615,670               328,775
Total                                    $        1,336,982    $        1,309,382    $        2,011,438    $        1,816,879

Key Metrics (as a percentage of total
revenues):
Personnel expenses                                       37 %                  30 %                  36 %                  31 %
Other operating expenses                                 14 %                  10 %                  14 %                  10 %
Total expenses                                           68 %                  57 %                  70 %                  59 %
Operating margin                                         32 %                  43 %                  30 %                  41 %

Key Origination Metrics (as a
percentage of origination volume):
Origination related fees                               1.28 %                1.17 %                1.36 %                1.25 %
Fair value of MSRs created, net                        1.26 %                1.22 %                1.31 %                1.40 %
Fair value of MSRs created, net as a
percentage of GSE and HUD origination
volume (2)                                             1.81 %                1.52 %                1.89 %                1.71 %




                                               As of June 30,
                                             2012           2011
Servicing Portfolio by Type:
Fannie Mae                               $ 10,618,195   $  9,922,926
Freddie Mac                                 3,395,683      2,556,343
Ginnie Mae - HUD                            1,578,227      1,073,400
Other (1)                                   1,970,727      1,873,235
Total                                    $ 17,562,832   $ 15,425,904

Key Servicing Metrics (end of period):
Weighted-average servicing fee rate              0.23 %         0.22 %

(2) The fair value of the expected net future cash flows associated with the servicing of the loan, net of any guaranty obligation retained, as a percentage of GSE and HUD volume reflects revenue recognized, as a percentage of loan origination volume, on those loans which the Company will record an MSR upon sale of the loan. No MSRs are recorded on "Other" originations or interim loan originations. For the three and six months ended June 30, 2012, interim loan volume was $9.5 million and $16.5 million, respectively.

Overview

Our net income was $9.3 million for the three months ended June 30, 2012, compared to $11.1 million for the three months ended June 30, 2011, a 17% decrease. For the six months ended June 30, 2012, our net income was $15.1 million, compared to $17.8 million for the same period in 2011, a 15% decrease. Our total revenues were $46.7 million for the three months ended June 30, 2012, compared to $42.4 million for the three months ended June 30, 2011, a 10% increase. The increase in revenues for the three months ended June 30, 2012, was primarily attributable to the 2% increase in origination volumes and 22% increase in servicing fees, when compared to the same period in the prior year. For the six months ended June 30, 2012, our total revenues were $81.1 million, compared to $71.4 million for the same period a year ago, a 14% increase. The increase in revenues for the six months ended June 30, 2012, was primarily attributable to the 11% increase in origination volumes and 22% increase in servicing fees, when compared to the same period in the prior year. Our total expenses were $31.6 million for the three months ended June 30, 2012, compared to $24.2 million for the three months ended June 30, 2011, a 31% increase. During the six months ended June 30, 2012, our total expenses were $56.5 million, compared to $42.3 million for the same period a year ago, a 34% increase. Increases in expenses in both the three and six months ended June 30, 2012, when compared to the same periods in

the prior year, are primarily attributable to increases in personnel, professional fees and amortization as we grow the scale of our loan origination platform, execute on strategic initiatives and grow our servicing portfolio. Our consolidated income from operations was $15.1 million for the three months ended June 30, 2012, compared to $18.2 million for the three months ended June 30, 2011, a 17% decrease. For the six months ended June 30, 2012, our consolidated income from operations was $24.6 million, compared to $29.1 million for the same period a year ago, a 15% decrease. Our operating margins were 32% and 30% for the three and six months ended June 30, 2012, respectively, compared to 43% and 41% for the three and six months ended June 30, 2011, respectively.

Revenues

Gains From Mortgage Banking Activities. Gains from mortgage banking activities were $33.9 million for the three months ended June 30, 2012, compared to $31.3 million for the three months ended June 30, 2011, an 8% increase. For the six months ended June 30, 2012, gains from mortgage banking activities were $53.7 million, compared to $48.1 million for the same period a year ago, a 12% increase. Gains from mortgage banking activities reflect the fair value of loan origination fees, premiums or losses on the sale of loans, net of any co-broker fees (collectively, "loan origination related fees"), and the fair value of the expected net future cash flows associated with the servicing of the loan, net of any guaranty obligations retained.

Loan origination related fees were $17.1 million for the three months ended June 30, 2012, compared to $15.3 million for the three months ended June 30, 2011, an 11% increase. The increase is primarily attributable to the 2% increase in origination volume, to $1.3 billion for the three months ended June 30, 2012. Origination fees as a percentage of origination volumes were 128 basis points for the three months ended June 30, 2012, up from 117 basis points for the same period in 2011, a 9% increase. The increase in loan origination fees as a percentage of loan origination volumes is primarily attributable to increased fees and premiums across the Company's product offerings. For the six months ended June 30, 2012, loan origination related fees were $27.4 million, compared to $22.7 million for the same period a year ago, 21% increase. These increases were primarily attributable to an 11% increase in loan origination volume, to $2.0 billion. For the six months ended June 30, 2012, origination fees as a percentage of origination volumes were 136 basis points, an increase of 9% from 125 basis points for the six months ended June 30, 2011.

The fair value of the expected net future cash flows associated with the servicing of originated loans was $16.8 million for the three months ended June 30, 2012, compared to $16.0 million for the three months ended June 30, 2011, a 6% increase. The increase was primarily attributable to the increase in . . .