Franklin Codel is head of Wells Fargo Home Lending, Des Moines, Iowa. As the nation’s leading mortgage lender with 40,000 employees, Wells Fargo funds nearly one out of every eight mortgages and services one out of every six.
Mortgage Banking
September 2016
By Robert Stowe England
Read article as it appears in the printed magazine at this link on pages 56 to 61.
Codel took the reins of the mortgage business in September 2015 from Michael Heid, who retired last year after 28 years with the company. Codel previously led the company’s loan production team from 2011 to 2015. Before that, he was head of mortgage finance. He joined Wells Fargo in 1993.
Codel currently represents the company on the board of the Mortgage Bankers Association (MBA) and the Housing Policy Council of the Financial Services Roundtable. He earned a bachelor’s degree in engineering science from Harvard University in 1986 and an M.B.A. in finance from the University of Texas at Austin in 1989.
Brad Blackwell is portfolio business manager for Wells Fargo Home Lending, where he focuses on enabling sustainable homeownership and growing the Wells Fargo portfolio. He oversees the Diverse Segments team, which works with outside groups to enhance homeownership opportunities for low- to moderate-income households, veterans and minority borrowers.
Blackwell is also involved with the Customer & Community Relationship Programs management team, which administers Leading the Way Home®, a national effort focused on providing consumer education, grants and home-preservation efforts, including the suite of Wells Fargo LIFT® programs. He earned a bachelor’s degree in political science from the University of Colorado Boulder in 1982.
Mortgage Banking caught up with Codel and Blackwell recently when they visited Washington, D.C., to lead a Sustainable Homeownership and Credit Access panel discussion convened by Wells Fargo at the National Press Club.
Q: How has the mortgage lending strategy at Wells Fargo changed in the last year?
Codel: We’ve grown successfully through the different eras in the mortgage industry. As a leadership team, innovation and collaboration drive our actions to serve our customers today and in the future. When I think about what kind of mortgage lender we really want to be, the continuity inside the organization is very important. We’ve had some leadership changes recently. But let’s not lose sight of the fact I’ve been with the company 23 years. Brad Blackwell has been with the company over 15 years. Most executives on the leadership team have been with the company more than 15 years. So, we might have moved some leaders around, but there’s really been no material change in the culture we’re creating. We have refined our strategies.
Q: How have your lending strategies changed?
Codel: We are at an inflection point. Delivering against our strategies and priorities is fundamental to our success and the success of our customers. In 2012, our market share of originations probably peaked around 25 percent. At that time, we took steps to simplify the business model by exiting the broker business, the joint venture business and the reverse-mortgage business. There have also been changes in the competitive landscape. Those changes have impacted parts of our business. But now we’re clearly in a position where one of our key strategies is to earn the future mortgage and home-equity business of our existing customers.
Wells Fargo does business with one in three households in America. Whether it’s a banking relationship, a brokerage account, auto lending or any of a lot of different products we have, we are doing business with a full cross-section of America. When I think about a lending strategy, we want to be the first consideration for any of our Wells Fargo customers who are interested in buying a home or who are interested in refinancing. We want to be there for them.
Q: How do you execute your strategy?
Codel: Our core strategies center on making sure we have viable programs, products, policies, team members and distribution channels available to serve different parts of the market. On one end, we work very closely with our Wealth and Investment Management group. We have wealth management team members who have clients with assets at Wells Fargo. They refer a lot of business to us. This may happen when their customers are considering purchasing a home for themselves or doing something for one of their kids or buying a second home. We have our mortgage lending team lined up with the organization in wealth management so that we can work together on referrals.
We also bring a lot of customers to the community. When we work the marketplace, we find customers that don’t necessarily have a Wells Fargo checking or savings account and we’ll introduce them to an adviser or a banker. That’s a very important part of our cross-sell model.
The key for home lending is to have the people and connections in place and scale to influence a financial services decision for new and current customers.
Q: What’s behind your strengthened focus on the first-time homebuyer market?
Codel: Young millennials will be coming to the market in increasing numbers. It’s the biggest single population in the history of our country. People today who are between 25 and 35 are in the age range when first-time homeownership tends to peak. In the coming years there are going to be literally millions and millions of new households formed. And they’re going to be looking for a lender who’s going to help them become a homeowner.
And certainly Wells Fargo is positioned to be viewed in the marketplace as a strong lender for first-time homebuyers, a strong lender for diverse communities and a strong lender for low- to moderate-income communities. These are all where the growth is going to occur in homeownership and in the mortgage space. This is a core value for us--doing what is right for our customers.
Q: You made news in May when you launched a new 3 percent down loan product in partnership with Fannie Mae. What segment of the market does this product target?
A: Our recent launch of yourFirst MortgageSM is designed to provide a simpler entry point for real estate agents, loan officers and consumers. It is designed for the first-time homebuyer in the market in the low- to moderate-income segment. There are many conventional loan products with low-down-payment options, but the guidelines are complex and often create barriers for qualified borrowers. Wells Fargo worked with credit experts such as Fannie Mae and Self-Help Credit Union – an affiliate of the Center for Responsible Lending [Durham, North Carolina]--to remove complexities and help qualified homebuyers achieve sustainable homeownership.
Q: Has it met your expectations?
Codel: It has exceeded our expectations. Brad, you worked closely on this and you’ve seen the initial response.
Blackwell: What I will say is we had high expectations for it and it has exceeded those expectations. It has brought simplicity to the market, a need we identified. There is so much complexity in the conventional conforming world when it comes to first-time, low-down-payment loans. Offering consumers and real estate professionals more simplicity makes our new loan product very attractive.
Q: How do you market a new product like your first-time homebuyer loan?
Codel: First of all, we created yourFirst Mortgage with the needs of the borrower in mind. One way to do it is to sponsor an event like the National Homeownership Panel. [That panel, convened at the National Press Club in Washington, D.C., on June 14 featured Gary Acosta, chief executive officer and co-founder of the National Association of Hispanic Real Estate Professionals (NAHREP), San Diego; Martin Eakes, chief executive officer, Self-Help Credit Union and Center for Responsible Lending; Laurie Goodman, co-director, Housing Finance Policy Center, Urban Institute, Washington, D.C.; and Cyrus Richardson, senior vice president for economics and housing, National Urban League, New York.]
We do it through 8,000 mortgage consultants who are in the local communities talking with Realtors®, talking to builders, doing first-time homebuyer workshops and talking to groups that they work with to find consumers and bringing the new loan product to life in the marketplace. That’s our biggest source of marketing.
Blackwell: That and our over 6,000 bank stores. So we have tremendous distribution and have a huge amount of enthusiasm from our team members. And that combination is ensuring that we get a lot of energy communicating this to our customers.
Q: Is it easier to close in a timely manner with yourFirst Mortgage?
Codel: It’s most important for the customer to have the right product and to understand the terms of that loan product. I’ll emphasize that we are diligent about ensuring that the borrower has an ability to repay. This is a loan designed for sustainable homeownership.
We seek to provide simplicity for the consumer. Your traditional conventional low-down-payment loans have had extraordinarily tight guidelines or have been very expensive, or had a lot of hoops to jump through. For example, you couldn’t exceed more than 80 percent of the median income of a particular metropolitan statistical area [MSA]. Or you had to buy in a certain census tract or you had to take a homebuyer education course. The combination of those things created barriers and prevented people from getting homes when they couldn’t fit all the specifications.
By removing those impediments, we have created a much simpler approach that is attractive to consumers while still having a broad set of traditional underwriting guidelines. Additionally, rather than making homebuyer education a requirement on a small percentage of what we do, we’re offering an incentive to enroll in homebuyer education for every borrower that applies for a low-down-payment loan. Recently it was a 1/8 of a percent interest-rate discount.
By the way, we’re the first and only lender that has done something like this. We’re doing this so that borrowers have a better understanding of what homeownership is all about. We think that is going to give them a better experience with homeownership. In addition, we believe we’ll see better loan performance subsequently.
Blackwell: Additionally, yourFirst Mortgage simplifies the application process for customers, real estate agents and home mortgage consultants. The program joins Wells Fargo’s existing suite of homebuyer services such as yourLoanTrackerSM, yourHome MattersSM and My FirstHome®, an interactive online program designed to help first-time homebuyers prepare to purchase a home and become responsible homeowners.
Q: Are there any particular homebuyer education programs you’re recommending?
Codel: First, it can be any [Department of Housing and Urban Development-approved] homebuyer education program. The online education course Framework® [sponsored by Framework Homeownership LLC, St. Paul, Minnesota] is the one that borrowers take the most because it’s very simple and we make it very easy for them.
But we are also in contact with major homebuyer counseling agencies to make them aware of our incentive. So, when other homebuyer education organizations bring customers through their programs, we will accept that and give the discount to those consumers who received their education and counseling.
Q: You were talking earlier about millennials. A lot of them have not yet established a credit rating. Is that a problem for them as first-time homebuyers?
Codel: Everybody has something that can be used to establish credit. They have utility bills. They have a rental history. They have cellular phone bills. They may have one car payment. We can use those to construct a financial picture of a consumer. It might, in some cases, not be as easy as pulling a credit bureau report and it may take an extra bit of work. But it is important to do that. That’s part of what needs to happen when you talk about serving the broad market and serving the underserved market.
Blackwell: And yourFirst Mortgage allows for alternative credit histories.
Q: Wells Fargo has always had a commitment to being a major player in the mortgage market. That hasn’t changed, has it?
Codel: Let’s look at it from a couple of angles. One is, there is no doubt that buying a home and getting a mortgage is one of the most--if not the most--important financial decision that many of our consumers make. So we want to be there to help those customers succeed financially and make good choices. That drives a lot of how we think about the mortgage business. We think about it as a key part of our customers’ financial picture and financial success. That drives our commitment to the business long term.
Now, we are very excited to play a national role in the conversation about credit access. Because we have broad distribution channels, we are in almost every market in the country. We have strong partner organizations, such as the National Association of Hispanic Real Estate Professionals, Fannie Mae, Self-Help and the Center for Responsible Lending, and a number of other organizations.
We want to be on the front lines of trying to develop some of these new policies, whether it is the credit policies we talked about, the alternative credit policy or some other policy--we want to try things out and if they work out, then we can scale them out across the country.
We have a national reach and a national distribution capability that we bring to the table from a policy and partnership view. As Brad said, we not only have 8,000 mortgage consultants, but we also have thousands of community bankers. We have thousands of Wells Fargo Advisors. Together these people make an incredible team that can touch a lot of consumers in the marketplace with a program like yourFirst Mortgage.
So, we’re excited about the future. We think we’re in a good position to serve the broad market, whether it’s lower loan balances or higher loan balances, whether it’s a first-time homebuyer or somebody buying their third or fourth or fifth home or refinancing, or what have you. We want to be there for all of them.
Q: You developed yourFirst Mortgage with Fannie Mae. How long did that take? Could you give me a history?
Blackwell: We imagined the program in January of this year and brought the concept to Fannie Mae in February. We then polished it up and refined the idea, and rolled it out on May 23. It’s the fastest program that Wells Fargo and, I believe, that Fannie Mae have ever developed and delivered.
Codel: Brad’s right. We pushed hard. The organizations came together quite well. We had a lot of commitment to this.
Q: Could you name some of the key people you worked with at Fannie Mae?
Codel: We worked with Andrew Bon Salle [Fannie Mae executive vice president for the single-family business] and John Lawless [Fannie Mae vice president of credit modeling and analytics], Jeff Hayward [Fannie Mae executive vice president and head of multifamily and formerly senior vice president of the National Servicing Organization]. They have been very helpful and very supportive.
Obviously, in terms of Wells Fargo, we had to make appropriate system changes, develop documentation, prepare our marketing materials and train our team--all those things. To do that in a 90-to-120-day window took a lot of focus. I am very pleased we were able to turn it around completely and get it to the marketplace.
Q: Are you continuing to do Federal Housing Administration [FHA] lending? If so, to what extent does yourFirst Mortgage replace FHA lending at Wells Fargo?
Codel: We continue to offer FHA. We have credit overlays on FHA loans. We see yourFirst Mortgage as an alternative for consumers. In most cases, it has lower monthly payments than a comparable FHA loan.
Further, the consumer starts with a higher equity position because they are not financing the upfront mortgage premium.
With our program, they have the ability to drop the mortgage insurance later in the life of the loan, which is not true for FHA. And if they run into financial stress, Fannie Mae loans have better loss-mitigation tools than FHA does. Because of these advantages, we are seeing migration of volume from FHA to our 3 percent down-payment program.
Q: Wells Fargo recently settled False Claims Act allegations brought by HUD and the Department of Justice, related to the FHA program. How has that decision impacted the company and your approach to working with the FHA?
Codel: It was the right thing to do for ourselves and our customers. When I step back and look at FHA over the last few years, we had a 12 [percent] or 13 percent share of FHA’s business from our retail originations in the 2012 and 2013 time frame. Since then, we have dropped about 75 percent of that market share. And we’re no longer the No. 1 FHA lender.
Q: The loan product yourFirst Mortgage, then, is trying to reach some of the FHA population?
Codel: If you looked at the FHA population and asked what portion of that population could be eligible for yourFirst Mortgage, it is a large portion. It’s not all of it. But it’s a large portion.
We believe that with yourFirst Mortgage, there’s more opportunity to actually grow the marketplace for people that may be thinking about being homeowners. We want to make sure they understand the program is potentially available to them. And we’d like to grow the business outward with that program.
Blackwell: If you think about it, we can do that in a number of ways. First, heavy promotion of this mortgage program lets consumers know that they can get into a home with only 3 percent down. There’s a strong myth out there that borrowers need 20 percent to buy a home and they self-select out of the process because they don’t have 20 percent to put down. This really helps to counter that myth.
In addition, while an FHA mortgage requires a 3.5 percent down payment, yourFirst Mortgage only requires 3 percent down. So, you need less money to get in. You might say, ‘Well, that’s not that much.’ But 3 percent is $6,000 on a $200,000 purchase price versus $7,000 with an FHA loan. It’s $1,000 dollars less. And for most borrowers, the payments are less. So, that makes it more affordable.
So, if I can come in with less down and it’s more affordable [and] I know it’s 3 percent and not 20 percent, you’ve just expanded the pool of homeowners. And you don’t have the impediments we talked about earlier to be eligible for the program. We made the process easier for the entire industry to deliver the product to consumers.
Q: I learned in researching millennials as homebuyers that they often come into an open house or new-home sales office thinking they have to have 20 percent down and are pleased to learn they need a much smaller amount that that.
Blackwell: Yes, that’s very true. Let’s say there are three major issues. The first is the ability for markets to produce affordable housing stock. There are many markets around the country where there is just not enough inventory of affordable housing. Secondly, we need to find ways to increase access to credit. And that’s the work we’re doing that Franklin was talking about. And third, there is the need for increased education for potential homebuyers. And if we can solve for those three things, then you’re going to see a significant increase in homeownership among that younger millennial and diverse set of consumers.
Q: What are you doing to educate people about the fact that you can get a mortgage for 3 percent down?
Codel: As America’s largest mortgage lender, we feel a responsibility to not only have a major role in the housing market, but also to play a major role in creating this kind of awareness that homebuyers do not need 20 percent down.
We just completed a survey of consumers that found that 40 percent still believe the myth that they need a 20 percent down payment. And 62 percent believe the myth [that] they must have a very good credit score. We are publicizing the results of that survey and offering information to reduce that kind of misunderstanding that represents a barrier to homeownership.
Events like our National Homeownership Panel at the National Press Club offer a serious conversation about housing and the issues surrounding housing and homeownership. So you’ll see a lot of work by Wells Fargo to ensure that we are making a difference in the homeownership rate.
Q: What population segments are you targeting?
Codel: The Millennial Generation is the most diverse generation ever in this country. And over the course of the next decade, 75 percent of all new households formed are going to be racially and ethnically diverse. And so we’re putting a tremendous amount of focus in ensuring that we have the cultural competencies, the services and products and programs that consumers need, a very diverse sales force, and that we’re located in diverse markets to ensure we’re reaching the communities we need to reach to help ensure homeownership across the broad spectrum of consumers.
Q: Among some ethnic groups the homeownership rate is lower.
A: Blackwell: Yes. It’s 42 percent for African Americans and it’s 45 percent for Latinos versus 64 percent for the general population and 71 percent for whites. So, if we are going to increase homeownership in this country, we’re going to do it by helping minority communities become homeowners. MB
Robert Stowe England is a freelance writer based in New York, New York and Milton, Delaware, and author of Black Box Casino: How Wall Street’s Risky Shadow Banking Crashed Global Finance, published by Praeger and available at Amazon.com. He can be reached at
