This week on Power House, Diego sits down with Jay Plum, a 35-year banking veteran and the EVP of Consumer Lending at Fifth Third Bank. As the 10th largest bank servicer in the country, Fifth Third Bank has over a thousand branches and $200 billion in assets.
Today’s conversation is all about mortgage lending. Jay and Diego talk about Basel III and its impact on warehouse lending, and the important role that the affordability programs like downpayment assistance play in increasing homeownership. They also talk about Fifth Third’s focus on MSRs and home equity products, and what they’re doing to increase market share in a high-rate environment.
Here’s what you’ll learn:
Fifth Third has many mortgage channels, including retail and correspondent.
Regulatory changes, such as Basel III, significantly impact the mortgage industry.
Affordability remains a key concern for potential homebuyers in a high-rate environment.
Fifth Third engages in community initiatives to promote homebuyer education and assistance programs.
Servicing mortgages allows Fifth Third to offer additional consumer lending products.
Related to this episode:
Fifth Third Bank
https://www.53.com/content/fifth-third/en.html
Home Lending | Fifth Third Bank
https://www.53.com/content/fifth-third/en/personal-banking/borrowing-basics/home-lending.html
Jay Plum | LinkedIn
https://www.linkedin.com/in/jay-plum-10b4806
Enjoy the episode!
The Power House podcast brings the biggest names in housing to answer hard-hitting questions about industry trends, operational and growth strategy, and leadership. Join HousingWire president Diego Sanchez every Thursday morning for candid conversations with industry leaders to learn how they’re differentiating themselves from the competition. Hosted and produced by the HousingWire Content Studio.
Today’s conversation is all about mortgage lending. Jay and Diego talk about Basel III and its impact on warehouse lending, and the important role that the affordability programs like downpayment assistance play in increasing homeownership. They also talk about Fifth Third’s focus on MSRs and home equity products, and what they’re doing to increase market share in a high-rate environment.
Here’s what you’ll learn:
Fifth Third has many mortgage channels, including retail and correspondent.
Regulatory changes, such as Basel III, significantly impact the mortgage industry.
Affordability remains a key concern for potential homebuyers in a high-rate environment.
Fifth Third engages in community initiatives to promote homebuyer education and assistance programs.
Servicing mortgages allows Fifth Third to offer additional consumer lending products.
Related to this episode:
Fifth Third Bank
https://www.53.com/content/fifth-third/en.html
Home Lending | Fifth Third Bank
https://www.53.com/content/fifth-third/en/personal-banking/borrowing-basics/home-lending.html
Jay Plum | LinkedIn
https://www.linkedin.com/in/jay-plum-10b4806
Enjoy the episode!
The Power House podcast brings the biggest names in housing to answer hard-hitting questions about industry trends, operational and growth strategy, and leadership. Join HousingWire president Diego Sanchez every Thursday morning for candid conversations with industry leaders to learn how they’re differentiating themselves from the competition. Hosted and produced by the HousingWire Content Studio.
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NewsTranscript
00:00Are you planning to take market share and mortgage in 2025?
00:04Yes, we're definitely going to take market share and we already are.
00:11And we're taking market share because service wins.
00:20I'm Diego Sanchez, president of Housing Wire.
00:24My guest today is Jay Plum,
00:26EVP of Consumer Lending at Fifth Third Bank.
00:30Jay, it's so great to have you on the show.
00:34It's great to be here. Thanks for inviting me.
00:37For those in our audience that aren't familiar,
00:39could you briefly introduce yourself and Fifth Third Bank?
00:44Sure, I'd be happy to.
00:46So Fifth Third is headquartered in Cincinnati, which is where I'm at.
00:51I've been in banking for 35 years.
00:56And I've had a number of bank T-shirts along the way.
01:01I'm a native New Yorker growing up in Brooklyn,
01:05but have been here in Cincinnati for those 35 years.
01:09During that time, I've managed consumer lending and mortgage
01:13for Citizens Bank, Huntington,
01:16and I've been at Fifth Third for about four years.
01:19I've also been on the MBA board of directors,
01:24president of the Ohio MBA
01:28on a bunch of different advisory boards like Blend Lending Tree
01:32and on the affordable housing committees for Fannie and Freddie.
01:37Fifth Third is a national bank.
01:40We have about 1100 branches,
01:43over $200 billion in assets.
01:47And we're one of the top banks in the country,
01:51although our branches stretch from Michigan to Florida.
01:55Nothing in Brooklyn yet.
01:57Not yet, but maybe soon.
02:00So, you know, recently there have been several
02:04depositories that have exited mortgage,
02:08including Ally Financial and WAFD Bank.
02:14What is Fifth Third's commitment to mortgage?
02:18We like mortgage. We're committed to mortgage.
02:20We think our customers view it as a core product.
02:24And so do we. So we think we need to be there.
02:27We have a retail distribution channel,
02:32a direct to consumer model, both phone and Internet.
02:36And then we have a large national correspondent business.
02:42So all told, we're in a variety of ways
02:47to get in touch with our customers
02:49and collect more customers for the bank.
02:52We do concentrate on the customer base within our footprint
02:58because we do want to sell them more stuff.
03:01That is something that banks
03:03want to do a little bit more than IMBs.
03:06And we think that that's an important role for us.
03:10And in your mind, how do you prioritize
03:13approaching those different channels
03:16in terms of priorities in the business, staffing, resourcing?
03:21Sure. Well, we're the 10th largest bank servicer in the country.
03:27So we've bought MSRs and that is purely an economic play.
03:35But we do like the MSR structure, like a lot of IMBs do as well.
03:41And we think that that's a great way to generate revenue.
03:45And the immortal role of buying low, selling high
03:51seems to have applied when we bought MSRs
03:54when they were at three and four percent interest rates.
03:58We're enjoying that now.
03:59As far as our other channels,
04:02you know, we do believe that professional sales matter.
04:07So we have a retail loan officer channel that services our branches
04:15and gets a portion of their business from branches,
04:19but calls on realtors because we think we can generate new to bank customers.
04:25In our correspondent channel, we have a smaller sales force
04:29and the margins are much tighter
04:31and we are a little bit more opportunistic there.
04:36It ebbs and flows based on a lot of different market conditions.
04:41And it certainly has gotten tougher over the past couple of years
04:44as rates increased.
04:47Our Internet business, our direct business, we call all over the country.
04:51And that business seems to be an emerging one for us.
04:56And we have a little bit more work to do there.
04:59But we overall remain committed to mortgage and like its prospects.
05:06In your retail channel, are the originators
05:11also talking to your customers about other consumer lending
05:16or are they focused on mortgage as a product?
05:19They're focused on mortgage.
05:21You know, it's a tough call.
05:23We would like them to talk about a couple of other products,
05:27notably home equity, because we just want to make sure
05:30that they have a lot of arrows in their quiver for whatever
05:34a customer happens to need.
05:36But if the customer has more complex needs, they'll do a handoff.
05:40We really want them to be the mortgage expert.
05:43We want them to be that champion for a customer.
05:47And we have a thing here that we talk about quite a bit.
05:51We say it's a family, it's not a file.
05:55And we spend a lot of time very consciously working with salespeople
06:01to make sure that they treat the customer carefully,
06:04that they help them be informed, that they hold their hand in the process.
06:08You know, it's an awful process no matter where you are.
06:11It's a lot of work, very confusing.
06:14And we want to make sure that that customer has that champion.
06:18And we think a dedicated loan officer for us can do that.
06:23Yeah, that makes sense.
06:24Now, over the past decade, mortgage origination
06:29has really been dominated by IMBs and mortgage brokers.
06:35Where do you think depositories like Fifth Third fit into that picture?
06:40Yeah, don't count us out just yet.
06:43But we we think that we're an important part of the mix
06:48for all of the mortgage industry,
06:51not just Fifth Third, but all regional banks.
06:54You know, it's not just the super large banks that can play in mortgage.
06:59By being in the correspondent business, we continue to provide liquidity
07:04to a variety of different IMBs.
07:07And we think that that's great.
07:12I think the market, the market is big enough
07:16that there's plenty of room for all of us.
07:18And our interests in being there are really to make sure that our customers
07:24who are larger financial service customers than just a mortgage
07:29on average, we we want to make sure that they have access
07:33to the very best products.
07:35And that's why we think we need to be in mortgage.
07:38And our role is to really help our customer directly.
07:43So we think that we can do that,
07:47perhaps a little better than some of our IMB friends,
07:50but not to the exclusion of them within the overall marketplace.
07:55And is mortgage an entry point for a customer who is new to Fifth Third,
08:01or do you almost always originate with somebody
08:06who is already a customer of Fifth Third?
08:09Great question.
08:11And I would like to say it's always somebody new to the bank,
08:15but it's a pretty fair split between the two situations.
08:21We we think that forging relationships with realtors and being in the communities
08:27is central to what a regional bank does.
08:31Every community needs a vibrant banking opportunity,
08:36not just for liquidity, but for helping with access to financial products.
08:41So there are going to be folks there who have set up deposits with us
08:46who want a mortgage, and they're going to be realtors out there
08:49who have somebody new to town, moving to town,
08:52who needs to set up all new relationships.
08:55And the mortgage is the first step to all the other products they get.
08:58We want to be the one that that customer turns to
09:03because they get such great service that they want to be with us.
09:08So Fifth Third exited the warehouse lending business relatively recently.
09:15Can you talk about why the bank made that decision?
09:19Sure.
09:21We weren't excited about it.
09:24And the reason why we left was because of the proposed Basel III rule change.
09:31And I think it's important to talk about that a little bit,
09:33because even though we're a bank,
09:36this Basel III proposed rule really impacted the entire mortgage industry.
09:43It made our MSRs more expensive,
09:45and it made things like warehouse a much more difficult business.
09:52Now, the rule is going to be,
09:56if it's not entirely abandoned, it's changed quite dramatically.
09:59So it's not quite the burden on capital.
10:02But regional banks, just like larger banks,
10:07offer tremendous amounts of liquidity to the market.
10:10And in a fragile industry like mortgage lending,
10:13you know, everybody has a role.
10:16And if regulation gets a little out of whack,
10:20like it did in the case of this Basel III rule,
10:23I'm not sure everybody understood the implications.
10:26And I think it's important for not just regional banks,
10:30but for IMBs to understand this Basel III rule was going to affect them,
10:35if not directly, then indirectly,
10:38by reducing liquidity for what we did with warehouse,
10:42and like a couple of other banks did with warehouse.
10:45As well as with different changes in MSR liquidity.
10:49It's all part of the same situation in the industry.
10:54And that's part of what makes mortgage so interesting
10:59and such a dynamic business.
11:03But it also means that when you do come up with regulations,
11:07you got to know all the different pieces of the consequences, not just one.
11:13This was not just a regional bank problem,
11:17but that's what we interpreted as a fairly significant problem.
11:22I think it's also interesting to note that we exited warehouse,
11:24but we didn't exit anything else.
11:26And if anything, our interest in all the other parts of mortgage
11:30is still just as high as it was before the rules were proposed.
11:35But we have a responsibility to make sure that everything returns the right way.
11:40And that was looking hard under the proposed rules.
11:43So we've got a new administration in DC,
11:46and they seem to have a different take on regulation,
11:50probably much more anti-regulation than the Biden administration.
11:56Do you think that could change the environment
11:59and maybe make warehouse lending more interesting to Fifth Third?
12:03I think it could make everything more interesting.
12:06And it certainly is making things interesting right now.
12:10I guess the biggest thing that I would say as I look at the regulatory environment
12:18is that we're just in the early innings of taking a look at a lot of
12:24regulations that have been put in place since the financial crisis almost 20 years ago now.
12:33But in that time, we've added a lot of regulation
12:39in all aspects of consumer lending and mortgage lending.
12:45And I think it's important that some balance gets restored,
12:49but I wouldn't go celebrating just yet.
12:53I think, frankly, I think some regulation is good.
12:57I think no matter what part of the industry you're in,
13:01an informed customer is always an important goal.
13:05Making sure that customer understands what kind of a loan they're getting into,
13:11that they understand all the implications completely and fully.
13:15It's hard to say that that's a bad thing.
13:17But some regulations might have added a little bit more cost than help.
13:25And those are the ones that I hope are targeted.
13:29But more than anything, I hope as we go down this road of looking at regulations
13:35and the institutions that regulate all the players in the industry, we do it thoughtfully.
13:42This is not the time to do things on the back of an envelope.
13:45It's important to make sure that everybody understands the implications
13:49with only one priority in mind, which is how does it impact the customer?
13:55If we can work on just taking care of the customer,
14:00focusing on reducing their costs and their burdens, everything will work out
14:05and we'll all be happier with a little bit more balance in the system.
14:11Switching gears a little bit, it seems like rates, mortgage rates in particular,
14:18are going to be higher for even longer.
14:21We're starting out the year above 7%.
14:25And I don't think we'll see meaningful movements down in the next couple of months.
14:30And this is right before a crucial spring home buying season.
14:35So I think growth in 2025 in mortgage means you're taking market share.
14:43Are you planning to take market share and mortgage in 2025?
14:48Yes, we're definitely going to take market share and we already are.
14:54And we're taking market share because service wins.
14:58No matter what part of the industry you're in, you got to take care of the customer.
15:03And if you do, good things happen.
15:05They'll share that experience with their friends, neighbors, family,
15:09and we'll get people calling us simply because we did the right thing for the customers
15:15that were involved.
15:17But your point about high rates is correct.
15:21And it certainly has made everybody in the industry a little grumpy to expect that we're
15:26not getting a bunch of rate reductions this year quite the way we thought in August of last year.
15:34While we're higher for longer, I think the bigger concern is
15:39we're higher for longer with higher home prices.
15:43So affordability is affecting parts of the customer base that you wouldn't think would be
15:50impacted.
15:52And we need to be careful about that.
15:55So whether it's a down payment assistance program or adjusted fees, and hopefully maybe
16:03it's regulatory changes and GSE changes that allow us to pass savings on to customers.
16:10We need to make sure that affordability is still reasonable for all aspects of the customer base.
16:18And the way the rates have gone, particularly with appreciation in some markets,
16:26I think we have a lot of people who are concerned that they can afford a home.
16:31They still can.
16:32It's just they need to get a sharper pencil in calculating it out.
16:36It's still a great way to build wealth.
16:39And we want to be right there with customers, helping them understand that equation.
16:43Yeah, your point on affordability is a really good one.
16:47We're actually, our next research paper at HousingWire is going to be focused on that topic.
16:52And we'll publish that probably in mid-March.
16:55Are you at Fifth Third doing things to help with affordability?
17:00You mentioned down payment assistance.
17:02There are other programs that can help put people into their first home.
17:06What's Fifth Third doing on that topic?
17:09Well, we're trying to be as proactive as we can on affordability.
17:13And there are a couple of things that stand out.
17:17First of all, is making sure that we're out in our communities
17:21talking about the information a customer would need to consider a loan.
17:26A lot of customers see home prices or hear about the rates
17:30and then just sit on the sidelines deciding to pay rent
17:34because they think it's overwhelming.
17:37They might not know of the different programs that are available.
17:41Some of the things that we do, we do have a down payment assistance program.
17:46We think that that is a critical part of tackling affordability
17:53because the down payment can be brutal depending on where you are.
17:59You know, it just is 20% down payment in certain parts of rural Ohio
18:07is much different than 20% down in certain parts of Tampa.
18:13But wherever you're at, 20% is a big damn number.
18:18And helping customers get there is a big deal.
18:23Is one key thing in Columbus, Ohio.
18:27And I'll talk a little bit about the Convergence Initiative from MBA
18:32that I'm chairperson of now.
18:36Getting different groups together within the city to talk about
18:41how do we provide home buyer education?
18:43How do we let customers know about available down payment programs?
18:47And how do we give them the confidence they need
18:51that they can actually go and buy a home is important.
18:55But on the down payment side,
18:58we worked with the Home Ownership Council of America
19:02and we've helped over 500 families
19:06get into a home that they didn't think they could have
19:09because of a special purpose credit program.
19:12One feature of which was down payment.
19:16I think special purpose credit programs,
19:19which popped up all over the place last year are important
19:23because they do provide ways that in a controlled manner
19:29can offer relaxed credit guidelines
19:33as well as down payment assistance.
19:35And Fifth Third has set up their own to do just that.
19:39Now it's not offered in every community
19:42and it's not offered to every customer,
19:45but it's offered to a heck of a lot.
19:48And whether it's our program or somebody else's,
19:52special purpose credit programs are going to be a key feature
19:57for helping people get in homes in the future.
20:00We were lucky enough to be one of the pilots
20:04for Fannie and Freddie in their programs.
20:08And we helped over 600 families just in the last year
20:12with that program.
20:14And that worked out great.
20:16Those are families who wouldn't have their own home.
20:20So we take great pride in that
20:22and we'll keep looking for ways to do things.
20:24Not everything will work, but the key is to try.
20:28And the key is to keep listening to the community's needs
20:31to figure out what we can do to help.
20:34I love that.
20:35That's a real impact.
20:36Hundreds and hundreds of families for sure.
20:39It's pretty neat.
20:40So Fifth Third has geographic strength
20:44in the Midwest.
20:45And then it sounds like down into the Southeast as well.
20:49Does your mortgage team originate
20:53beyond that geographic footprint
20:55or do you stay within the confines
20:57of where Fifth Third has branches?
21:01Our immediate sales force of loan officers
21:04in the field is in that area.
21:06But I do have a few that I can get you a deal in Brooklyn
21:10if you really are asking that.
21:12So that's not a problem.
21:14But beyond that, yes, our sales force
21:17is best served physically in our territory,
21:22helping out our branches
21:24and making sure that we're the presence
21:26in the communities that we operate in.
21:30Our call center, our correspondent business,
21:33our internet business is more national in scope
21:37and we'll serve as customers however they get to us.
21:40I think that's gonna be much more significant
21:42in the future, but I've always thought
21:46we need to be where the customer is,
21:48servicing them in the way they wanna be serviced
21:52with as much or as few interactions as they want,
21:58making sure that they have access
21:59to all the data that they need.
22:01And as long as we do that,
22:05while I'm excited about our salespeople in the field,
22:08I am also excited about just getting a new customer
22:11wherever they might be.
22:13So let's talk products.
22:14What's the product suite for mortgages at Fifth Third?
22:21It's great.
22:23All right, I'll go into a little bit more detail.
22:26We have a little bit of everything
22:28and it speaks to the idea of
22:31we think customers need options.
22:34And it's probably one of the things
22:35that differentiates depository institutions from IMBs.
22:41I have a portfolio, I can use it.
22:45And for certain customers, I use it.
22:48So my lending authority goes up to 15 million bucks
22:52and I can do a lot of wealth loans.
22:55I don't do very many,
22:57but we can do those and put those in our book.
23:02But I also can do some unique things on affordable housing
23:06that don't necessarily conform to Fannie Freddie guidelines.
23:11Like my special purpose credit programs.
23:14And I can also portfolio those loans
23:17and offer those communities more diversity
23:19in the products that are available.
23:21Just like everybody in mortgage,
23:23we love what the GSEs offer.
23:27But I think making sure that we have a multitude of products,
23:31which is occasionally very annoying.
23:34You know, it is a pain in the neck
23:35to maintain all the rigor around 250 products.
23:42But I think being able to deliver a customer
23:45the maximum flexibility with a variety of options
23:48that can be customized to them
23:51is worth the complexity and worth the hassles.
23:54Because it's always and always has to be
23:57about the customer and their needs.
24:00Absolutely.
24:00But I imagine there's an education challenge
24:03not only with the customer,
24:05but with your Salesforce with that many products.
24:08How do you keep them educated
24:11about this very large menu of options?
24:16Well, we like to view them as real estate professionals.
24:22And our expectation is that this is what they do.
24:26They need to know how to put somebody on a loan.
24:28And that's in their best interest to know our product set.
24:31But sometimes they don't know all of it, as you indicate.
24:34And then we have to have systems that support their effort.
24:38You know, going back to the idea of
24:39is FifthWard committed to mortgage?
24:42We've committed to upgrading our origination systems
24:46and upgrading our servicing systems,
24:49pretty significant investments.
24:51And all of them will be designed to
24:54not just help the customer with digital servicing
24:58and digital tools,
25:00but also help the colleagues
25:02with access to resources,
25:04to know more about the products we offer,
25:06the processes we have,
25:08and to make those processes easier.
25:10I mean, it doesn't substitute for a great conversation
25:14with a great loan officer who can really listen
25:17and tell you,
25:18hey, these four products
25:20sound like they would be the best for you.
25:23But we think that we can help that loan officer figure out,
25:26is it really four products?
25:28Was it three?
25:28Was it five?
25:30And give them the tools they need to
25:33make sure that that's a rich conversation.
25:36You mentioned being opportunistic about MSRs.
25:39And I wonder,
25:41are you servicing those folks in-house
25:46or do you have a subservicer
25:47that handles the servicing relationship?
25:50We really respect subservicers,
25:52but we do it all.
25:54And we like to keep servicing
25:57and we enjoy having a big book,
26:02not just for the opportunity to service their mortgage,
26:06but also to tell them about other products
26:08that Fifth Third offers.
26:10In my own little consumer lending world,
26:14we have cars, RVs, boats.
26:17We also are one of the largest solar lenders in the country.
26:22And between all of those products,
26:25let alone home equity,
26:26we have a lot to offer the customers
26:29that we service on the lending side.
26:31But we have a lot of pretty attractive depository products.
26:34We think being the servicer
26:36makes it a little bit easier for us
26:38to deliver those conversations
26:40and deliver those products
26:42and strengthen our relationship.
26:44And maybe through that strengthened relationship,
26:48change the nature of the economics
26:50on the underlying MSR a little bit as well.
26:52Yeah, that's really interesting.
26:53I mean, the recapture opportunities
26:55are not just in originating or refinancing,
27:00but you've got all these other consumer lending products
27:03that you can recapture folks with.
27:05Servicing is an invitation.
27:07And being able to prove to them
27:10that they're gonna get great service on the mortgage side
27:13gives us the opportunity to talk to them about other stuff.
27:18And then when they have a home equity,
27:21it's likely that they're gonna also call us
27:24when they finally want to refinance that first mortgage
27:28or change the nature of their other debts
27:30into a cash out refi.
27:33And someday there will be cash out refis again.
27:36There are a few now, but there'll be more later.
27:40And I think we're pretty well positioned
27:42as long as we take care of that customer
27:44through the cycle and through the process
27:47and make sure that they know that they matter.
27:50We're not so big that we're not concerned
27:54about each customer in the portfolio.
27:58And so everybody matters.
28:02So what is an ideal percentage for you
28:05in terms of the mortgages you originate
28:09moving into your portfolio?
28:13That's a great question.
28:15And one that changes quite a bit.
28:18And it really is tied to interest rates.
28:23And it's also tied to the regulatory environment.
28:27This Basel III thing was going to change
28:30that percentage dramatically
28:33because the cost of those loans was going to skyrocket.
28:40That added capital could have meant
28:43that we would have only done affordable housing loans
28:46for our book and look to sell just about everything.
28:51Fortunately, with the changes,
28:52we're a little bit more reasonable.
28:55I could give you a percentage,
28:56but it honestly changes based on rates
28:59and based on what the market demands.
29:03But if we had our druthers,
29:06we'd be selling a majority of our loans every month.
29:12That's not to say we don't want to use
29:15our portfolio.
29:18It's just that the economics are better to sell them.
29:22Jay, this has been a really fascinating conversation.
29:26Thank you so much for joining me today on Powerhouse.
29:29It was great to join you.
29:30I really had a good time.
29:32And let me know when you need that refi.
29:34I'll get somebody out there.
29:35Absolutely.
29:36Thanks so much.
29:38All right.
29:38Take care.
29:44Bye.