MReport April 2020

TheMReport — News and strategies for the evolving mortgage marketplace.

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Page 9 of 67

8 | M R EP O RT M // What defined the past year for Flagstar and you personally, and what goals do you anticipate in the months ahead? FERCHO // First, last year was a great year for Flagstar and the industry. We started the year with a continuation of trends from 2018, including a rising interest-rate environment. Competition was at an all-time high and lenders weren't making money. Then we hit March 2019 and the 10-year treasury yield dropped from 260 to 234, and we've been on this run ever since. (It is worth noting that, at press time, the 10-year was under 1%.) The successes of last year were primarily about lenders returning to profitability and helping bor- rowers refinance. It was one of the strongest years in Flagstar's history. Second, I would say that we've really started to see the capacity of the industry expand. People are hiring again. The rate of employ- ment in housing has increased for the first time in recent years. When the mortgage industry is doing well and lenders are hiring, that's better for the overall economy, and the consumer gets the benefit. The refinances that we're seeing are largely loans that we originat- ed in 2018 or 2019. So borrowers who only recently originated these loans are already benefiting from this market. M // With ongoing concerns about an economic downturn, how do you prepare for shifts in the market? FERCHO // One of the things we're proud of at Flagstar is our scalable mortgage platform and the ability to originate in all six channels. This allows us great flexibility to respond to market shifts and to grow in a way that's sustainable. Last year we've added a couple of strong teams and loan advisors in our retail channel, and they will contribute to our growth for years to come. Right now we are in the midst of a refinance boom, and like most lenders, we're focused on scaling our business to help as many customers as we can while still providing great service. To do that, we use overtime and incen- tives with our staff, engage third party vendors in the U.S. and abroad, and use our great mort- gage insurance partners who do contract underwriting to support us. Then, when the wind shifts, we back away from those vendors' services without having to let any full-time employees go. That's been a hallmark of our success—that scalability of our platform. M // Where are some key areas of improvement for the industry? FERCHO // First and foremost: digital. It's stunning to me that mortgage is the last process in financial services that hasn't been fully digitized. There's been some good progress, but a downside of the rally in the mortgage market is that it's taken us away from investing in the infrastructure for digital transformation. The focus needs to be on continuing to digitize the mortgage process and remove the paper. According to NAR, 90% of consumers now search online when looking for a house. We are all more accustomed to utilizing technology in our daily lives, so to continue to have a paper-based mortgage process simply doesn't make sense. eMortgage, eClosing, eNotes, remote notarization—all of those parts of the digital experi- ence, from front-end to back-end— that's where the industry needs to focus on. M // Why has the mortgage industry lagged behind in technological advancements? FERCHO // Buying a home is the most significant financial purchase many of us will ever make, and it's complex and time-consuming. Every step of the process is heav- ily regulated with virtually every- thing needing documentation. The legacy of the financial crisis has continued to impact the industry on multiple fronts. Take remote notarization. It's only approved for eClosings in certain states. There are some jurisdictions that won't allow it— you still have to walk in with the bill of sale and have it stamped. EXPERT INSIGHTS ON: LENDING Learning From the Past MReport spoke to Kristy Fercho, EVP and President of Mortgage for Flagstar Bank, about the industry's need for a shift to digital, insights she took from her time at Fannie Mae, and keeping focus on the homeowner. K risty Fercho joined Flagstar Bank in 2017 as EVP and President of Mortgage. She is responsible for the direction and oversight of all aspects of mortgage and the secondary market for Flagstar, as well as the expansion of its mortgage business. Fercho previously spent 15 years at Fannie Mae serving as its SVP, Customer Delivery Executive, where she was responsible for the end-to-end strategy and business perfor- mance of all single-family customers in the western half of the U.S.—an acquisition volume of more than $300 billion. Here's what Fercho had to say when MReport recently caught up with her during an industry event.

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