Why Fifth Third Bank expanded when others pulled back

HousingWire

What happens when a bank decides to invest in mortgage while much of the industry is pulling back?  On this episode of Power House, Zeb Lowe sits down with James Sias, Head of Mortgage Lending and Indirect Dealer Services at Fifth Third Bank, to discuss leadership, growth and the long-term future of mortgage lending.  The discussion also tackles the broader forces shaping mortgage today—from Basel III capital requirements and regulatory policy to the role customer relationships play in a large banking environment. Throughout the conversation, Sias argues that sustainable growth comes from staying focused on the customer, investing through market cycles and creating an environment where loan officers can succeed.  Related to the episode:  ⁠Zeb Lowe’s LinkedIn⁠ https://www.linkedin.com/in/zebulon-lowe-a02353a4/  James Sias' LinkedIn https://www.linkedin.com/in/james-sias-7456936/  Fifth Third Bank https://www.53.com/content/fifth-third/en.html  Want more from Zeb? Don’t forget to subscribe to LendingLife. https://www.housingwire.com/newsletter/  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’s Zeb Lowe 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.

Transcript

00:00When most banks were stepping back from mortgage, today's guest was doing the opposite.

00:04James Sias is the head of mortgage lending and indirect dealer services at Fifth Third Bank,

00:09now the ninth largest bank in the country.

00:12There, he helped build the division into a top 15 bank lender originating over $5 billion a year.

00:17Today, we get into the turnaround, the expansion,

00:20and how James thinks about mortgage as something much bigger than a product.

00:33All right, James, thank you for joining me.

00:36Absolutely. Thank you for having me.

00:38Yes, sir. We were just speaking a little bit before we started rolling.

00:43And like I said, I know a little bit about you.

00:47I know who you are. We've never had a chance to speak one-on-one.

00:51I think you told me that the last couple of gatherings, you'd seen me,

00:55and I was always kind of hemmed up talking to somebody else.

00:58So I'm excited to get to know you, know more about you, and what you're doing at Fifth Thirds.

01:05Awesome. Yeah, well, I'm excited to be here.

01:07You're obviously a very popular person as I tried to catch you at the gathering,

01:13and you were always surrounded by folks.

01:15So I look forward to meeting you in person next time.

01:17But I live in Cincinnati, Ohio.

01:19I've been at Fifth Third Bank for about three and a half years.

01:22Been in the mortgage business for 26 years now.

01:27Married with four kids, all who live in Cincinnati, and two golden doodles.

01:32So that's me in a short nutshell.

01:34I've got a golden doodle myself.

01:38Actually, you just kind of glazed over that.

01:40That was the first thing I was going to ask you, a little bit of your backstory

01:42and curious as to how you got into the industry.

01:45But you can suss that out a little bit.

01:46How did you first get into the mortgage industry?

01:48So growing up, we moved around quite a bit between Michigan and Ohio.

01:52My dad was in financial services and worked in banking.

01:55And with the consolidation and the way things happened, he got moved around Michigan a couple times,

02:00then to Columbus, and 31 years ago to Cincinnati.

02:04And so growing up, I wanted to be anything but a banker.

02:08Wasn't particularly strong in math.

02:10It was probably the one career I didn't want to be in.

02:13And then I graduated and wound up in a management training program at a bank

02:19and went around to different areas, spent time in the commercial group, the auto leasing group,

02:24the consumer lending area, and really kind of found a niche in the consumer lending group.

02:30And, you know, as they say, the rest is history.

02:34Been in financial services and specifically consumer and mortgage lending for 26 years now.

02:41But it wasn't what I thought I was going to do, like many, but it's proven to be a wonderful

02:46career.

02:47I had some – we've got a lot of stuff to talk about.

02:49But as I was doing a little bit of online creeping on you, your title,

02:56you're the head of mortgage lending and indirect dealer services.

02:59I understand mortgage lending.

03:01Can you suss out and explain what indirect dealer services is?

03:06Yeah.

03:06So while I'm responsible for our mortgage originations at the bank,

03:11about two years ago I took on responsibility for our indirect auto lending.

03:15So that would be our lending that we do with dealerships directly, not through our branches,

03:21but we deal with 6,000 dealerships across the United States and finance those borrowers.

03:27And that's as big of a business as our mortgage business is.

03:31We'll do about $9 billion in indirect auto with the sixth largest prime auto lender in the country.

03:38And our business, mortgage business next year, we'll do $8 to $9 billion.

03:42So they're similarly sized.

03:43And while it may not seem obvious, there are some synergies to managing both,

03:49and I'm having a lot of fun doing it.

03:50That's what I wanted to ask you.

03:51How different are those worlds?

03:54Well, interestingly, the indirect auto business, I'd say, is probably very closely correlated to dealing with correspondent lenders.

04:04And years ago, my first job at Huntington Bank was managing the correspondent lending division.

04:09So going out, working with business-to-business customers, so in correspondent land, working with mortgage brokers and correspondents,

04:18and in direct lending, going out and working with our auto partners to originate and use them as distribution partners

04:25to generate mortgage business.

04:27So we've got a correspondent lending business here.

04:30And as I've got into the indirect auto business, it has a lot of similarities.

04:35You know, we've got account reps that call within a geographic territory, become trusted partners.

04:41And we really lean on both the indirect auto dealers and our correspondent partners to try and build deep partnerships

04:49that are mutually beneficial for both organizations.

04:53Okay.

04:54Well, actually, I have some auto stuff that I was going to ask you about.

04:59Like, this isn't a – I'm going to have to ask you about that offline because that's not what our

05:02audience is particularly interested in.

05:03We can get you a loan for sure.

05:05Yeah, for sure.

05:05Let's get back to the mortgage.

05:06So you stepped into the mortgage division at Fifth Thirds in early 2023, I believe.

05:13And that's not – I would – assuming just the timeframe there, the business was not exactly booming.

05:22So what was the – on day one, what did you uncover?

05:27What did you find?

05:28And what was the first major change that you made?

05:31Well, coming in, I did a lot of due diligence.

05:34And I knew that over the last 10 or 15 years, a lot of banks made the decision to step

05:39away from mortgage.

05:40And I understand why.

05:42It's cyclical.

05:43It's heavily regulated.

05:44Margins are volatile over the place.

05:47But I've always looked at it differently.

05:49And when I first joined the bank – actually, when I was interviewing, when I was still interviewing – the

05:54first conversation I had with our CEO was about mortgage and, you know, his view on it for the bank.

06:00And he was unequivocally clear with me and direct, mortgage mattered to him, not because of earnings or, you know,

06:10this year's production volume, although it's certainly important.

06:12But he recognized that mortgage is one of the few products that can establish a decades-long relationship with a

06:21borrower.

06:21And so while a lot of companies evaluate mortgage based on what it's going to deliver this month or this

06:28quarter and kind of short-term profitability metrics, we evaluate it based on the lifetime customer value.

06:34So instead of pulling back over the last 10 or 15 years, the banks leaned in.

06:39And not recklessly.

06:40You know, we've been very deliberate about where we invest, who we hire, how we scale up.

06:46And it's made a difference.

06:48You know, what we've seen in our book is mortgage customers don't just do a single transaction.

06:54They actually do 30% more products with us than a standalone checking account customer.

07:00So they also carry a significantly higher balance and deposit than the mortgage customer.

07:05So that's a big deal.

07:07And that retention compounds years over years, over decades.

07:11And so when I got here, you know, they had shared that there was some work to do.

07:17You know, the group had been under-invested in from a technology perspective, didn't have a CRM.

07:25That was, I did a lot of due diligence.

07:26I asked about a lot of systems.

07:27But I got here and I asked an MLO.

07:29I said, what's the CRM we use?

07:32And they said, what are you talking about?

07:34We don't have one.

07:35And I said, well, yeah, you do.

07:36You know, it's the system where you put your customer notes and follow.

07:41And he's like, we don't have one.

07:42And so I went and asked somebody else.

07:44And it turned out the bank didn't have one.

07:46It was a top 50 lender in the United States, but it didn't have a CRM.

07:51Fortunately, some progress had been made on starting to look at one.

07:56And it was in process.

07:57But we ultimately rolled one out and we've been updating the technology infrastructure at the bank over the last three

08:04years.

08:04And what we've really done is kind of raise the expectation for all of our partners, for the internal partners,

08:10for MLOs, that we have a right to win.

08:13We have a right to win in this business and that we have a responsibility to take care of our

08:18customers.

08:18And all the foundation was here.

08:21We just had to peel some layers back and raise some of the expectations and upgrade some of the technology.

08:28And we've made significant progress over the last three and a half years.

08:32We're not there.

08:33We're probably on the 40-yard line going down the field, but we've made significant progress.

08:37I'm curious, what is your take on kind of a compare contrast on tech adoption and buy-in with originators

08:49in a bank setting versus a traditional retail or a broker shop?

08:54Because mortgage industries, generally speaking, we're pretty notorious for being late adopters.

09:00And getting buy-in and adoption from your originators, it is a struggle.

09:08I come from the retail space, wholesale correspondent and brokerage background myself.

09:16I don't know what it's like to work within a banking environment.

09:19And so from a leadership perspective, are there the same challenges when it comes to tech adoption at an organizational

09:28level, systems level, and at the sales, the originator level?

09:33Or do you think that they're different than you would see in a retail shop?

09:39No, I think they're probably very much the same.

09:41When we were evaluating CRM solutions, I went to Total Experts Conference, and we were considering them.

09:49So I talked to a number of their providers or lenders.

09:54Every lender I talked to, one of the questions I'd say is, hey, do you guys have a group of

09:58people who don't use the system?

10:00And every single one said somewhere between 15% and 25% won't adopt.

10:05Every single one, like Lockwork, nobody said, yeah, we've got 100% adoption.

10:10And I was surprised about that because they said, hey, on average, we find on average it increases an MLO's

10:16volume 10% to 20%.

10:17So I'm like, why wouldn't people want to utilize this?

10:20And so when we came in, we talked about it a lot.

10:23I shared that story with our entire sales team.

10:26I said, guys, I'm sure this won't be you, but this is what I heard at the conference.

10:30And so we took great care in rolling it out.

10:34We took great care in making sure folks were trained.

10:39They understood the opportunity that was there.

10:41We spent a lot of time saying, hey, they may not want to do it, but if we can talk

10:44to them about what the opportunity is, that it can increase their business, who wouldn't want to do this?

10:49And fortunately, we wind up with probably about 90% adoption, folks who are using it regularly.

10:56But yeah, there's some folks who, for a variety of reasons, are slow to embrace technology, even when the answer

11:03is obvious.

11:03And so when I think about technology generally, I think about it, it really should serve the relationship, not replace

11:12it.

11:13And so that's what we talked to them about.

11:14We're not trying to replace you, but we've made deliberate and meaningful investments to try and enable them, make them

11:22more effective.

11:23You know, borrowers are becoming more digital savvy.

11:26So, yes, they expect some online capabilities and a good experience.

11:31They expect fast pre-approvals, real-time status updates.

11:36And we've got tools like Blend and Total Expert and a variety of others that give us that.

11:41And so we got pretty good adoption.

11:44We strive hard.

11:45I find one of the things is just consistency, consistency, and bringing it up to them over and over.

11:51And we put people through special coaching sessions and do a variety of things to try and get traction.

11:55But I don't think our experience has been any different than a retail IMB and other lenders in that regard.

12:02Yeah.

12:02I want you to mention this in one of your earlier responses, the CEO and his decision to lean into

12:11mortgages when a lot of people's banks are pulling back and based on, you know, that that's a customer, you

12:20know, the customer for life.

12:21Right.

12:21And just from your perspective, I can't know this for sure, but from your perspective and your opinion, I mean,

12:27this is – the industry knows that or knows this.

12:32Why do you think that banks continue to pull back and not really lean into that direction?

12:40It's a good question because we obviously do.

12:43I think part of it is, you know, as I mentioned, short-term view on earnings and profitability.

12:52You know, there's no question.

12:53Mortgage is not a business where you always look smart quarter to quarter.

12:58We didn't build this around short-term earnings and what we're going to make next quarter in 2026 only.

13:04We're building it for long-term customer value.

13:06And so if you don't take that view, if you only look at it as what's going to make me

13:11next year, it can be a tough decision.

13:13You know, you don't always look smart in the mortgage business.

13:16You look really smart when rates are at 5 or 4, but when rates are at 6.5% to

13:207%, it can be a challenge.

13:23And so, you know, what gave us confidence at banks I've worked at to go against the trend is, you

13:31know, we didn't have a reactive decision when rates went up.

13:34It was something that we were building a long-term strategy for years.

13:38And when that conviction stays consistent, you're able to stay the course even when the cycle turns.

13:44And I think some folks just lose that conviction or don't recognize the opportunity that's there with having a mortgage.

13:54Every institution has different priorities, you know.

13:56So I'd say there's trade-offs.

13:59For some people, it might be the right choice.

14:01But when you – my key point would be when you give up mortgage or exit mortgage, you're not just

14:07giving up a product.

14:08You're giving up the potential of a long-term relationship moment.

14:12And in a business like banking where, you know, customer primacy is king and is matters, that's a pretty big

14:20thing to walk away from.

14:21So, yeah.

14:23Whenever you made the decision to invest into mortgages, what was the – can you talk – can you walk

14:33me through the recruiting and the onboarding?

14:37I would assume that there was an overhaul to all of that.

14:43Whatever the big – whenever your big recruiting pitch or initiative was, what your onboarding looked like, what had to

14:49be changed there?

14:50What had to be bulked up?

14:51Walk me through both of those.

14:53Expansion in mortgage sounds really simple.

14:56You know, I've worked at banks where folks, leaders, hey, let's grow a mortgage.

14:59Let's do this.

15:00It's really not simple.

15:02One thing I've learned is that mortgage is incredibly local to the market.

15:08So, yeah, technology matters.

15:10Products matter.

15:11Sales matters.

15:12But –

15:13Can I – let me ask you this real quick, and then we'll go back to the products, right?

15:17What is your – what did – how much more, I guess, exotic is your product portfolio than Chase or

15:25going to Wells Fargo, right?

15:27Because those are, generally speaking, those are fairly limited – a fairly limited product portfolio.

15:30Yeah, I mean, I haven't studied them specifically to say what programs they do or don't have.

15:35But I tell you, we have one of the most extensive loan programs of any financial institution I'm aware of.

15:41Yes, we do conventional.

15:43Yes, we do Gavi.

15:44But we've got medical professional loans, construction, jumbo, rehab programs for the portfolio, non-QM products.

15:54We've got a variety of CRA.

15:55And one of the big offerings we've got is we've got over, I think, 500 approved down payment assistance programs.

16:03So, not all those are through us, but we've signed up and we're affiliated, if you will, with organizations that

16:10offer over 500 DPA programs to help buyers get into homes.

16:15And so, that's a big deal.

16:16So, we've got a very, very extensive product set because we want to be able to say yes to as

16:22many customers as we can to help them.

16:24So, product set's a big deal.

16:25Okay.

16:26All right.

16:26So, back on track.

16:27I'm sorry.

16:28I didn't want that to get away from me.

16:32You're onboarding and you're recruiting.

16:34Yeah, absolutely.

16:35So, back to – oh, yeah.

16:37So, mortgage sounds simple.

16:39It's really not.

16:42It's local.

16:43The technology matters.

16:44That's what I was saying.

16:45But trust matters the most.

16:47If you don't have trust, you're not going to be able to convince any MLOs to come here.

16:53You're not going to convince any borrowers to want to work with you.

16:56So, first, I think you've got to follow where the demand is.

17:00And that's why we focused on markets like Texas, California, and the broader Sunbelt.

17:05There's just real population and housing growth there.

17:09But it's difficult to go out and scale mortgage as an outsider in these markets, particularly in Texas, I've learned.

17:17This is still very much a relationship-driven business.

17:21And so, instead of just opening up branches and hoping it works, we've invested very heavily in bringing in leaders

17:28who have deep roots in the communities.

17:31And we think it's important to bring on somebody who's had 20 years in the market.

17:36They're not learning those markets.

17:38They've already helped build teams in those markets.

17:41They understand the nuances.

17:43Consumers and realtors want somebody.

17:45They want a partner that understands their local market and local housing dynamics.

17:50So, when we enter a market like that, our job is to find and combine the local expertise with all

17:57the resources of the ninth largest bank in the United States.

18:01And that's where we think the opportunity is.

18:03So, at the end of the day, we're very excited about our expansion in Texas and California.

18:09We actually had no loan officers located in Texas or California on February 1st.

18:20And today, we've got about 30 loan officers started with us, another 10 that have accepted offers and are in

18:28background.

18:29Those 30 loan officers we've already hired, they closed last year a billion dollars in mortgages.

18:35So, that's real growth.

18:38These are real experienced professionals that we're bringing on to service clients in those areas.

18:43So, our message, our vision, and what we're bringing to the table is resonating with MLOs in those states.

18:50And we've actually hired more MLOs this year than we hired all last year.

18:55So, it's been a big effort on our part, but it's been very successful.

19:01So, I know the reality and the truth is far more subtle and nuanced than this, but I'm painting with

19:09broad strokes here.

19:12Whenever you – as a loan originator, you don't normally associate a bank with like an extensive product suite and

19:22not – and being recruited as an LO, especially like an existed LO.

19:27That you know your community, you know your local market, going into a bank as a path for growth.

19:36And like I said, that's not – obviously, it's far more subtle and far more nuanced than that.

19:40But I'm just talking kind of the general perception amongst LOs and within the industry.

19:46And so, I'm curious to know what kind of – did you find that hesitancy or is there any particular

19:56obstacles or roadblocks that you feel like you have faced or that you do face being a bank as opposed

20:02to a more traditional, like you said, like a retail shop or a brokerage?

20:05Does that make sense?

20:06It sure does.

20:07It's something – yes, it absolutely does.

20:10It's something that we've had to answer during the interview process with a lot of candidates because they're used to

20:17banks not acting like an IMB and, you know, not being nimble, not being motivated to, you know, build a

20:27mortgage business, not being focused on customer service.

20:32And so, we are unique in that way, I think, in that, you know, we're part of the ninth largest

20:38bank in the country, but we operate in a lot of ways like an independent mortgage bank in terms of

20:43our focus, singular focus in our organization on providing a best-in-class mortgage experience.

20:49And so, we do find ourselves, you know, talking to MLOs and recruits, and they're skeptical because they've worked at

20:55banks where, you know, they were in, then they were out, where it wasn't a priority.

21:01And so, it is something new.

21:03People are hesitant.

21:05Not – no, it's not common.

21:07It's probably a better thing.

21:09And so, you know, we do get approached with some skepticism, but one of the things we always do is,

21:15why don't you talk to one of our top producers here?

21:17Why don't you see what they say about the experience and what it's like?

21:20And, you know, we're always happy to have our current colleagues talk to them and share what their experience is,

21:25positive and negative.

21:26And that's been – that's really resonated as we've kind of opened the door and said, hey, you know, we

21:32are what we are.

21:33We're trying to move this business forward.

21:36We're excited about where we're going, and we'd love for you to be part of the journey.

21:39And here, talk to another top performer about what their experience is like.

21:44And folks generally have been very appreciative of that, and we've overcome a lot of skepticism and uncertainty by trying

21:53to be as open and transparent as we can.

21:55So would you say that that is the – in the recruiting process and the sales process, you have a

22:00lot of levers to pull, right, to gain that trust?

22:04And so the social proof – you don't have to listen to me.

22:09You can talk to loan originator, two counties over, or, you know, whatever it is.

22:13Has that generally been the most effective lever to pull in the recruiting process?

22:19It's been as effective as any.

22:21The other thing we've done is we've been very thoughtful as we've entered new markets on identifying managers who are

22:31respected and have a network.

22:33And so, you know, when we hired Brian Izzell in Texas, you know, Brian had a strong reputation in the

22:39market.

22:40Folks knew that if Brian made a move to an organization, a lender, a bank, that there must be something

22:48good.

22:48There must be a story there.

22:49And so hiring Brian to lead our efforts in Texas, I think, opened up a lot of eyes to our

22:56organization and gave us some credibility.

22:58And then him coming in and having a positive experience and growing the team has just kind of built on

23:03itself.

23:03As he's brought top performers over, they've shared their experience with others.

23:07And I think we've hired, you know, 20 MLOs in Texas over the past, you know, three or four months.

23:13Talk to me about your – so we kind of covered the recruiting stuff, but the onboarding process because you've

23:20got to have a very efficient, very effective onboarding process to continue growth and retention and everything else.

23:31So what type of – and I've seen a couple of posts.

23:35I don't remember if it was just through Fifth Thirds, if it was through your LinkedIn specifically, where you're able

23:42to get these LOs up and running in relatively short order.

23:46So what does that onboarding process and practice look like?

23:52Was there anything that you had to kind of reinvent, like the wheel to accommodate your particular situation?

24:01One big thing we did, and it wasn't my first year here.

24:05It was probably a year into my tenure.

24:07You know, we hire new MLOs every month.

24:09And so once a month we do a training class.

24:11And the class is typically a week long.

24:13And they get to learn all of our tech systems.

24:15They get to have speakers from the underwriting and product and pricing group come in.

24:21And during COVID, they made this class remote.

24:24So folks would spend eight hours a day for a week on a remote, you know, Teams call learning this

24:31information.

24:32And, you know, we were operating in 15 states.

24:36And so a lot of times folks would never get a chance to come to headquarters, come to Cincinnati, meet

24:41everybody.

24:42And so about two years ago, we said, why don't we do this in person?

24:47And started, you know, thinking about it and talking about it.

24:51And it's certainly an investment to bring 100 loan officers or 150 loan officers a year to the market for

24:57a week.

24:58But we thought it was a great idea.

25:00And so what we do now is we bring everybody in for an entire week, Sunday through Friday afternoon.

25:05And they get to meet their colleagues.

25:08They get to do the training in person, which we think is a much better experience.

25:13And then we do a couple of cool things.

25:15One thing is every day during the week we do lunch with leaders.

25:17And so I go in one day and talk about, you know, my journey, how I got here, where I

25:24think we're headed, and answer any questions.

25:26The head of retail sales goes in another day.

25:28The head of consumer lending comes in.

25:31They get to meet the underwriting manager.

25:32So they get a chance to put a face with all the names they're going to talk to at corporate.

25:37And we get, we have got unbelievable, it's the top rated thing about their feedback is, or the feedback surveys

25:44was, hey, the week I got to come on to Cincinnati and the lunch with leader sessions, we also do

25:50two or three happy hours that week where we invite all the leaders from the org to come out and

25:55meet these colleagues and interact with them on a social basis outside of the office.

25:58And so it really helps to onboard them to our culture, talk about our expectations, and let them see that,

26:07you know, we're all people trying to move toward with the same goal.

26:12It's not just, hey, that corporate office in Cincinnati that they've never been to, or making it real, we're introducing

26:18them to all the people they're going to talk to.

26:19So that has made, we've seen our retention improve materially since that.

26:24We've seen the speed with which people ramp up cut down by about a month with this, since we transitioned

26:32to an in-person.

26:32So it's been an investment.

26:34We spent a couple hundred thousand dollars on that a year, but it's an investment that's paid for itself over

26:39and over.

26:40The other thing we do here is we, in addition to a processor, an underwriter they work with, every new

26:46colleague that comes in, we assign them their own virtual sales assistant for four to five months.

26:52And that's their contact, in addition to their manager, in addition to everybody else, this person that's here to support

26:58them, this person they can call anytime.

27:00So their manager's not available, they've got a virtual sales assistant that can help get their loans in the system,

27:06help them get onboarded.

27:08If they forget something from training, they can call their virtual sales assistant.

27:11And that's a team we staff, again, help onboard them for the first four to five months as they transition

27:16and make it better.

27:18That was something I'd never done at another organization, but it was in place here.

27:22And we've made it better over the past couple of years, but that's been a big help in getting people

27:28onboarded as well.

27:29You had made some comments, which is, I don't, I said I come from a different side of the mortgage

27:36sector.

27:36I'm not so familiar with the banking side about, I believe it's Basel III.

27:42Can you, did I pronounce that correctly, by the way?

27:44Yes, sir.

27:45Is it Basel III?

27:46Basel III, yeah.

27:47Yeah, can you share, I just don't, just me with our audience, you know, what that is and why you

27:53feel a certain way about it?

27:55Yeah, it's called Basel III.

27:57People will call it the, you know, capital rules, but it's kind of the risk framework around capital standards for

28:06banks in terms of how much money they need to hold on a variety of risk assets and a whole

28:13framework for capital management.

28:15And the revision to the rules has been under consideration for a couple of years.

28:22They made a big step in 2023, my first year, after the regional banking crisis, Silicon Valley and some other

28:33banks, they come out with some very strict proposals around steps they wanted to take to increase capital requirements.

28:41And it was, they were proposals, but what we saw was a lot of, a lot of banks and financial

28:46institutions pull back in lending.

28:48So, you know, we did, for instance, we pulled out of mortgage warehouse lending immediately, you know, in large part

28:56because of the proposed rule that was coming into play.

28:58We also cut back on our mortgage lending because the proposal was going to make it much more expensive to

29:05hold mortgage and other types of consumer loans on your balance sheet.

29:08Recently, earlier this year, the Fed came out with, you know, revisions to that proposal.

29:14And, you know, my perspective, I think the direction of the conversation now is very constructive from a, from a

29:22practitioner standpoint.

29:24I think the key is really making sure the rules actually reflect the real economics and risk of the business.

29:31That's, that's, that's what everybody should agree on.

29:34I think that's pretty simple.

29:35And, you know, take mortgage servicing rights as an example.

29:40MSRs are a real asset class.

29:42They generate, you know, recurring cash flow.

29:45They create long-term relationships.

29:48The proposed, the rule when it went into place made it very expensive for banks to hold on to mortgage

29:53servicing.

29:54And you saw as a result, a lot of banks reduce the size of their mortgage portfolio, get out of

30:00the MSR business, get out of the origination business, because they didn't want to have a servicing business.

30:05The re-proposal recognizes some of the challenges it created and has made meaningful progress.

30:12The proposal comes out now, it came out, removes the CET1 deduction and framework that had discouraged banks from participating

30:21in servicing by imposing a penalty above a certain level of assets.

30:26That's a big improvement.

30:28Similarly, the proposal's got a, it seems to be moving towards a loan-to-value-based approach for mortgage loans

30:36that are going to be held instead of one size fits all.

30:39That seems directionally sound because loan-to-value is an important predictor of risk.

30:47I think it's also great the regulators have invited participation.

30:51I saw today the CBA submitted comments, a comment letter, around additional dialogue topics like mortgage insurance.

31:00You know, the rule today doesn't differentiate the capital that a bank has to hold for a loan that has

31:07mortgage insurance and one that doesn't.

31:09So if you've got two loans with identical, say, 95% LTV, but one has third-party credit insurance done

31:16on my company and one doesn't, it's reasonable to ask whether the risk on those two loans should be viewed

31:22identically from a capital perspective.

31:26You know, I have my own opinion about that.

31:30I think the point is, the system works best when the capital rules reflect the actual economics to participants.

31:39So that's good for lenders.

31:41It's good for borrowers.

31:43It would provide more liquidity.

31:46And ultimately, you know, if there's more participants, it'll likely drive the cost down in mortgages for consumers.

31:51So some good things.

31:54The comment period, I think, is ending today or tomorrow for the new rule, but certainly a big deal that

32:00all banks and lenders should be.

32:03It impacts IMBs, whether they realize it or not, because there's significant rules on warehouse lending.

32:09And, you know, if they're not, if they're not, if they continue to be punitive and, and not balanced to

32:17the economics of the business, other lenders, other banks could decide to get out of the mortgage warehousing business.

32:22And that wouldn't be great for the ecosystem.

32:24When is the, so there's a commenting period that you say has finished wrapping up either today or tomorrow.

32:29I believe it's this week.

32:31Yep.

32:31It's this week.

32:32Okay.

32:32And when will there be finality around this?

32:37That is a great question.

32:39I, I, I don't know that I, I don't have a crystal ball on that one.

32:44I'd be hopeful by the end of the year, but, you know, they proposed this, the first revisions in 2023

32:49and they didn't go anywhere.

32:52So it's tough to say when there's no, there's no firm date on when everybody's agreed to make the changes.

32:58This probably depends on how extensive the, uh, the comment and review process is.

33:02I got you.

33:03Okay.

33:04Uh, as I said, I was doing a little bit of a internet creeping on you before this and that

33:08you, um.

33:09The big deal.

33:10Yes.

33:10Well, I say that's how I, I learned about, uh, that.

33:13And thank you for sharing that with me because I had, I had, I had no idea.

33:15Um, but I also saw that you, uh, wrote a post about Peter Lugers and it, uh, teaching you, uh,

33:24a lesson in, uh, in leadership.

33:26Can you share that with us?

33:29Yeah.

33:30What did Peter Lugers teach you about leadership?

33:32Well, uh, I had a chance to go to Peter Lugers during the, uh, NBA secondary conference in New York

33:37city back, I guess, May last month.

33:40Um, and, uh, I've been going to the conference for 15 years and have never left Manhattan to go to

33:46a dinner.

33:46And just, this is the last year of the conference is in New York for a while.

33:50And, and, uh, somebody invited me to go there and I was very excited.

33:55It's been on my bucket list forever, but it's about a 30 minute drive.

33:58It's 30 minutes or so from, from Manhattan to town.

34:01And so we went over and, uh, you know, I'd seen it on the food channel.

34:05I, I'd heard about it.

34:06Uh, always wanted to go, but it never been.

34:08And then we went in and the place was absolutely packed.

34:11Um, you know, I had to stay standing room only as we got a drink waiting for our table.

34:15Then we sat down and they hand you menus and the menu says steak for one, steak for two, steak

34:21for three.

34:22Somebody asked me what kind of cut I got.

34:23I said, I had steak for four was what we got.

34:25So I don't, I'm not exactly sure what it was, but it was the biggest plate of steak you've ever

34:30seen.

34:31And, uh, Harry was our waiter and Harry came out and we were first timers.

34:36So we had some questions and we ordered about 15 items, you know, sides, desserts, some drinks.

34:42And Harry stared at us, listened to everything we said, uh, didn't take one note and picked up our menus

34:50and laughed.

34:51And then we're like, there's no way he's going to remember all those 15 things.

34:54Holy smokes. And he comes back, he got our drinks, right. Uh, brings out the meal and it just looks

35:00amazing.

35:01Uh, everything was, was perfect.

35:03And then, uh, you know, there's a big plate of steak on the table and he carefully, you know, uh,

35:11cut individual pieces, you know, put one sideways, one up, you know, uh, one upside down.

35:17And, and, and stacked them on each other and then carefully scooped a, a, a, a spoonful of juice, poured

35:25it on each individual plate.

35:26And there were four of us. He took the time to do this for every single person and, uh, uh,

35:31was, was one of the best steaks I've ever had.

35:33An amazing experience. You know, he checked on us probably 15 times while we're eating.

35:38Um, uh, one of the most impeccable, uh, examples of customer service that I've ever experienced in a restaurant and

35:45they were busy.

35:46I mean, we waited 15 or 20 minutes for our reservation. Uh, the place was packed. Every table was full,

35:52but we felt like, you know, we were the only table he was servicing, but we, we could see him

35:57at every other table.

35:57And he, he made an amazing experience when they brought the dessert, they made a big deal about it. Um,

36:02we bought some merchandise and he, he brought it out in nice boxes.

36:05So it was just, it was, uh, everything I had thought and more in terms of the experience.

36:11And, uh, one of the things I was left with was just how this guy probably had no idea.

36:16Harry probably had no idea, you know, in his mind, he was just going about doing his job, but, but

36:21he was so skilled, such a craftsman perfected that job so well that it, it made an impression on us.

36:28You know, we're in the financial services, but we're, we're in the service business as well.

36:32And, uh, the way that he went about his craft and, uh, uh, blew us all away, uh, without feeling

36:41like he was probably doing anything special, uh, was really a testament to, to the experience that they built and

36:46that Harry helped provide for us that night.

36:48Yes. Uh, it's funny that you mentioned that cause I've got, uh, uh, a small group of friends where we

36:54have a long running inside joke.

36:57I mean, I know, I remember, uh, there's, there's a guy that actually works at the Dunkin' Donuts right down

37:03the street from me.

37:04And I was in Frederick, I was in Fredericksburg, Texas, having, having breakfast one morning with a friend of mine

37:08who, uh, manages and runs several nursing homes across Southeast Texas.

37:13And I've got a, there's a list, but I, with, with people in the food service industry, where after leaving,

37:19I've, if I had, man, if I had three guys like that working for me or three ladies like that

37:23working for me, I'd be a millionaire.

37:25You know, it's, it's, uh, it's really interesting how, how, how people in this industry are in leadership positions where

37:30you can, you kind of can spot that, uh, spot that in other areas.

37:34And I've, I've had many conversations about that with people in, um, in this industry through the food service industry,

37:43right?

37:43Meeting someone, meeting a waiter or a waitress or, uh, um, or a concierge.

37:48And like, man, if I had, if I, if I had that person on my team, I would be a

37:51millionaire.

37:51That is the, that's the exemplar for, um, for what service should be in like dedication to your craft, you

37:58know?

37:58Yeah.

37:58I mean, it's something, you know, and it was, it's not rocket science.

38:01It was, it was waiting our table, but he made it and he made it a member, which is, you

38:06know, something we experienced multiple times a week.

38:09If you, he made it a memorable experience and, uh, you know, it's not cheap to eat there, but, but

38:15we can't wait to go back.

38:16And if we do, uh, we're going to ask for Harry.

38:18He made that big of an impression.

38:19There's actually, this rolls into, uh, one of the last things that I wanted to touch on with you, because

38:24we're coming up on our time here shortly.

38:26Um, AI, uh, you know, there's a fear, obviously there's the AI fear, um, that that's coming for, you know,

38:34everyone's, everyone jobs and loan originators are, um, they're not safe from that either.

38:41And I was curious to know how, how you felt, felt about the role of AI in regards to, uh,

38:49not just not, not, not the industry, but the loan originator specifically.

38:52And what you think the, uh, the, the role of a loan originator will look like in the next five

39:00or five or 10 years.

39:01And in my opinion, I think it's ties perfectly back into that conversation about Harry, which is the, it's the,

39:08it's relationship and this experience and what you can offer another human being.

39:12Um, but what about you?

39:15Yeah, this, we're in the middle of going through a big tech conversion.

39:18We're going to be moving our LOS system to, uh, encompass.

39:22We're moving from empower to encompass.

39:24Uh, we'll move early next year.

39:26And this is something that we're giving a lot of thought to.

39:29We are knee deep right now in, in redesigning workflows, uh, figuring out, you know, who's going to do what

39:35in the new system.

39:35Um, and, uh, the way that, that I've thought about technology is that it should serve the relationship, not replace

39:44it.

39:44And we've made, as I said, real meaningful investments to enable that.

39:49Um, I want our MLOs to spend less time managing follow-ups and more time having an actual conversation with

39:56the families.

39:57So, yeah, we offer a fully digital application experience to blend if that's what you want to use.

40:03But for the customer who wants speed and self-service, we can deliver a clean, frictionless digital application, you know,

40:11from app through commitment.

40:12Uh, but what we found, what I've seen, is even in the most, uh, sophisticated digital markets, even with younger

40:19borrowers, even especially, uh, a lot of them want both.

40:23They want the convenience of digital and a loan officer they can actually call and have a real conversation with.

40:29But especially, especially when it comes to first-time homebuyers, uh, self-employed borrowers, or even move-up borrowers navigating,

40:38you know, a more complex, uh, property.

40:41Maybe they're moving into a condo or building a home for the first time.

40:44So we're looking at AI, you know, we're looking at how can the technology make our people, uh, more available,

40:52not less necessary.

40:54So, um, that's, that's the thought that we kind of approach it with.

41:00And, and we've made dark, you know, a variety of targeted process improvements along the way.

41:05This will be a transformational step for us going to this new LS system.

41:09Um, but I think if we do it right, uh, this technology will create more space for the human conversation,

41:15not less.

41:16And, and it'll make our best MLOs more effective, but we'll, we'll need all of them.

41:22I like that.

41:22Um, what you just said, I, I have, I, this is a large part of my job.

41:27I have a lot of these conversations on a regular basis.

41:29When this comes up, people have a, uh, I don't know, they have a, like a Rolodex of some key

41:36phrases, uh, that they use.

41:38And they'll kind of shuffle, uh, around, um, but, uh, I've never heard someone say that before.

41:45And I really liked that, that your AI is to be used to make someone more available, not less necessary.

41:52Uh, I asked very, very well put.

41:55Um, all right, well, James, we're, we're, uh, we're running upon our, our time here and I appreciate you taking

42:01the time to let me get to know you a bit and, uh, share your, your insights and information with

42:07us.

42:07And I look forward to, I'll be seeing you right in a, in another month or two at the AI

42:12summit.

42:13Well, you might.

42:14And let's, uh, next time we're in, let's get to Peter Luger's together and go experience that.

42:19Yes, sir.

42:19I'd love it.

42:20Thank you, sir.

42:21All right.

42:21See ya.

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