DALLAS-It’s said that necessity is the mother of invention. This has been the case with Jeff Morgan, founder of residential lender Mortgages USA and Bernard P. “Bud” Malone, a veteran expert in multifamily lending. Malone’s “necessity” was to get back into the industry after selling Malone Mortgage Co. in 2005. Morgan snagged the expert to spearhead a new multifamily lending decision, leading to that favorite business adage, a “win-win” situation.

“I endured retirement for years based on non-competes,” Malone tells GlobSt.com. During that period in the late 2000s, and in a nod to his University of Notre Dame Law School degree, Malone opened a law office. However, “as a transaction lawyers, it was bluntly evident there were no transactions,” Malone comments.

For Malone, who spent decades making loans to various commercial real estate interests, observing changes in the industry was somewhat disheartening, especially in the area of multifamily loans. “I do believe they’ve imposed restrictions on the programs that aren’t necessary or hopeful to ensuring access to capital for development on the one hand, and having enough rental housing for Americans on the other,” Malone states.

So Malone decided it was time to get back in, but in a vested interest. In attempting to raise capital to launch his own new company, he met Morgan, who was handling strictly residential mortgages.  Malone says he explained to Morgan his desire to launch a new multifamily firm, and Morgan’s response was that Malone join him as a partner to launch a Morgtages USA multifamily division.

Though Malone’s re-entry into the business was fairly straightforward, the climate in which he is now operating is changing. Malone acknowledges a paradigm shift in the housing market – because of the rockiness in single-family housing, more and more people are moving into renting. “It doesn’t mean Americans will give up on owning their own home,” he notes. “But that value has been deferred. There will be more market demand in rental and Jeff Morgan, to give him his due, saw that.”

A couple of other noteworthy trends the mortgage veteran sees are the weakening of CMBS and a shift in the industry to more government-backed mortgages.  “Right now, FHA multifamily programs, as well as Fannie (Mae) and Freddie (Mac) have more interest than they’ve ever had in their history,” says Malone, who has been involved in the industry for close to four decades. “We’re seeing clients, operators and developers who never would have in the past considered using the FHA route for rental housing or health care financing interested in that.”

The U.S. government, however, needs to upgrade its own resources – such as employment, training and technology – to meet the growing demand and interest. “However temporary this trend might be,” Malone says, “it’s a situation that needs to be addressed.”

Malone knows of what he speaks: His early career was spent with the Federal Housing Administration as a legal research specialist, then associate regional counsel in Fort Worth.  He was in private practice during the 1970s and 1980s and in 1989, founded Malone Mortgage Co., which focused on FHA multifamily lending programs as well as special servicing with respect to Government National Mortgage Association (GNMA) mortgage-backed securities.