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Ask the Expert: Consumer Lending Predictions for 2021


December 10, 2020

Max Simkoff Welcome, everyone, to Ask the Expert, where we ask industry leaders about their unique perspective on how to navigate the most difficult challenges faced by the broader real estate and financial services ecosystem and also give you a chance to ask the expert some of the most pressing questions on your mind. My name is Max Simkoff, I’m the CEO of States Title, and today I’m excited to welcome Jay Plum, Executive Vice President of Consumer Finance at Huntington National Bank, to talk about the topic “Consumer Lending Predictions for 2021.”

Just some quick background on Jay. He is currently responsible for the origination functions of mortgage, home equity, personal loans, and card products for Huntington Bank, which is a $100-billion dollar bank based in Columbus, Ohio. Jay joined Huntington in 2009 as Director of Consumer Lending. Under his leadership at Huntington, home lending grew to be the top mortgage lender in Ohio and the fourth largest originator in Huntington’s footprint. Home lending also became the sixth largest home equity lender in the nation. Before Huntington, Jay was President of Home Lending Solutions at Citizens Bank, where he was responsible for mortgage and consumer lending. He also spent time as Manager of Consumer Lending, Mortgage, and Card at Provident Bank, and he began his career at Bank One in Cincinnati.

So, welcome, Jay. Thanks for being with us today.

Jay Plum Thanks, Max. It’s great to be here.

Max Simkoff We’re coming to the end of 2020, which I am personally looking forward to. I am not sure who said this quote, but I think they said it best when they said they’re looking forward to 2020 being hindsight. We’ve had a crazy year in many respects. The mortgage industry in particular has had a remarkable year. Low rates have led to some of the highest refinance volumes in years. And so maybe if we could just start with how this environment has affected your team at Huntington and how you’ve managed through it.

Jay Plum Sure. Well, thanks again for letting me join you guys today. And I’m sorry that the expert that you had signed up backed out and you’re left with me, but I’ll do my best to answer a few questions for you guys. You know, 2020 started off still pretty strong. 2019 was not a bad year. 2019 was a little bit more surprisingly good than we had expected. And we really began staffing up sometime in June and August. And frankly, we went to work from home for most of our job families in 2019.

You know, nobody has ever attempted to do what the mortgage industry has done in 2020, which is deal with the pandemic, service customers well, and see your business nearly double in a record amount of time. And what that’s meant for colleagues as well as managers are just unprecedented challenges.

That ended up creating some flexibility for us that we really capitalized on when all the lockdowns began. You know, nobody has ever attempted to do what the mortgage industry has done in 2020, which is deal with the pandemic, service customers well, and see your business nearly double in a record amount of time. And what that’s meant for colleagues as well as managers are just unprecedented challenges.

When I think about the managers, not only did you have to think about different scheduling options, but you also had to think about different communication options. If you couldn’t have a staff meeting and you couldn’t plan out work as a group in an office, how do you do that effectively so that you know what your daily workflow is? We were fortunate in that we had tackled a lot of those logistics because we had moved to work from home.

And the reason why we had moved to work from home partially was because it was easier for colleagues and they enjoyed that flexibility, but partially was because we were so busy that the extra commuting time made a difference in overall overtime hours that were available to get things done. So everybody had to be on their toes and everybody had to think about things. But I think that the key issue that the industry really has had some challenges dealing with – and we certainly had in the first half of the year – was this was great for like 90 days. And then for nine months, it became just exhausting. So the exhilaration and the idea of super-low rates and record volumes quickly became exhausting to so many job families as it just went on and on. And that represented a real challenge for managers.

Some of the things that we did to address it was to do silly things. So there’s a chance that I have been known to wear a costume or two, but very rarely on a Zoom call. But I certainly tried to do silly things and encourage my managers to come up with new ways of communicating and relating with folks so that we had outlets for some of the pressure that was building because, again, we’ve never had a break. I think there was a quote in Mortgage News a couple of months ago – and I often say you gotta make some hay while the sun is shining – but farmers do get nightfall. And what we’ve had in mortgage is almost nine months of sunny days. That’s hard for any team, but it’s been particularly hard for most mortgage teams when you add in the level of volume.

Besides the occasional costume thing, we would send out personal notes. So I myself sent out probably about 500 personal notes to different folks on the team at various points – all my managers did as well – because the personalization and the communication with the colleague saying that, “Hey, we know that everything in your life is kind of crazy and you’re dealing with all kinds of homework situations and bandwidth issues of your home office that’s now in your bedroom because your kids are using the dining room.” and just trying to relate back to how crazy it is.

And I’ll close with one final story that probably says a little bit about the wackiness that we had endured, but also speaks to the idea of – in a situation where everybody is so tense – you really have to think outside the box. We have about 1,600 colleagues in Consumer Finance at Huntington, around that number, and we have different advisory boards where folks give us some feedback, which we think is really helpful and it gets opinions out there. But on one of my advisory boards, I asked what we could do to help. Could we provide tutoring services for colleagues? Could we send a pizza home? What would it be? Because we couldn’t buy lunch for everybody like we would normally do because everybody’s at home.

even though we have so much work to do and so many customers to help, we still have to keep in perspective the organization’s values and our willingness to look out for colleagues and to occasionally do a few silly things to entertain folks.

So somebody said, well, you know, it would be great if you could just do something in the afternoon that might be a little different to give people a break. And I said, “OK, well, what do you think?” and jokingly they suggested that I read a book. So naturally, because I like to take ideas and make them extravagant, that became Mr. Plum’s Neighborhood. And once a month we would get everybody together and I would play Mr. Rogers and I’d do a few things and I would read a book to people’s kids. And we probably had about 30 percent of the department show up, which doesn’t sound like a lot, but it gave folks a sense of “you gotta keep some balance here,” even though we have so much work to do and so many customers to help, we still have to keep in perspective the organization’s values and our willingness to look out for colleagues and to occasionally do a few silly things to entertain folks. And no, we will not be showing that video today, but it was a fun way to get folks engaged.

Max Simkoff I’m curious, what were some of the books that you read? What was your favorite book that you read?

Jay Plum I think the first one was the favorite one. It was Frozen and it was a Frozen pop-up book. And yes, I did dress as Olaf and it matched my enormous round head to act like a snowman.

[Both laugh]

But it was just silly enough that people took a break. They laughed a little bit. Their kids liked the book. We gave out some prizes and it was just something unusual that we never would have thought of, except that we realized we’ve got to connect a little differently if everybody’s at home.

Max Simkoff Yeah. And it’s just fascinating that, you know, it’s odd that in a time where you’re quite literally prevented from human contact of most kinds that, you know, just a story like that shows that it pushes you to establish ways of authentic contact that are super personal in a way that we might not have done before a situation like this. So that’s a great story.

Jay Plum We have a series that we’ve run for a while called “Family, Not a File,” and what we talk about in those articles is some customer story where somebody in the organization went above and beyond to recognize that it’s not just an application. It’s not just a file of loan information. But it’s a whole family that is looking to get into a new house or to make their personal financial situation better by refinancing. And we’ve done that for years in a way of trying to take some customer stories and let folks in the back office feel the magic that some of the folks in the front office feel when they meet a customer for the first time, or they go to a closing and they see the customer get the keys to the new house. That’s always important for customers, and it’s important to make sure that everybody can relate to the customer. And we had to do a variation on that to make sure that we were relating to colleagues and have the same sincerity of conversation about what’s important, what do we value, and how do you communicate with each other in a way that understands that this is not a normal situation. But we’ve all got families going through a lot. How do we relate a little differently?

Max Simkoff Yeah, and it’s actually, I mean, mortgage in general has and consumer lending broadly has historically been relationship-driven. I might even call it relationship-centric, right. That you’re forming relationships with your customer that if you’re doing right by them, those relationships can continue over many years.

And I’m just curious, like, have you seen a change in that given, you know, social distancing, in-person restrictions, like, it’s harder for people to walk into a branch or even to do a closing? Have you seen any significant changes there this year as we’ve managed through this?

Jay Plum We’ve seen lots of changes and it’s been dramatic. So, you know in 2019, everybody was talking about electronic closings and how they seem like a nice idea. And then we would look at the stats and see that nationwide, maybe 10,000 people close loans electronically. So we knew it was coming. But it’s going to be pretty low on the IT prioritization list because it just was not being demanded by customers. All that changed in March and going into April when closings started getting canceled and we did a variation on DoorDash and had “DocDash” where we worked with some of our partners to bring the documents to somebody’s home, put them on their front step in a bag, and then ask the customer to call the settlement agent from the title company who is in their car to walk them through the documents. And then after the customer had signed them, put them back in the bag and put it back on the front porch.

in an era where we closed our branches, we opened our branches, and with the second wave, we’ve closed the lobbies again, we have to have that flexibility and have to give a customer options so that both they can stay safe and the colleagues involved can stay safe. And I think you’ll see even more of that coming in 2021.

That bought us some time. But then we really accelerated our efforts on electronic closings. So we got something up and running that was serviceable by May, which was, you know, close to impossible, but the team did great. But we’ve continued to refine it so that it’s a much more robust tool now that customers are using it, and we’ve rolled that out for mortgage and home equity. And we’ll try and have that available for some other consumer lending products by the end of the year into Q1. I still don’t know if everybody’s going to want to use it, but in an era where we closed our branches, we opened our branches, and with the second wave, we’ve closed the lobbies again, we have to have that flexibility and have to give a customer options so that both they can stay safe and the colleagues involved can stay safe. And I think you’ll see even more of that coming in 2021.

Max Simkoff And I’m curious, you know, I’ve heard this repeated in other conversations I’ve had about the future of eClosing, which is variations of “it’s getting better, but, it may not be for everyone and everyone may not want to use it.” What do you say? Is there a way for it to get to a point where everybody prefers that option? What do you think is lacking in the current landscape of what’s available that if it were solved, everybody would just default to that option? Because that’s the thing that I still am a little bit befuddled by, especially in the current environment. Why is everyone, in states where it’s accepted – which just as an ironic aside, California happens to be still the only state where you cannot do a remote online notarized electronic closing – but in states where it’s accepted and certainly across a lot of your footprint, it is, and allowable, why does everybody not just do that? What do you think are the primary factors that need to be gotten over so that it becomes the default option to do everything electronically?

Jay Plum Well, it’s not insignificant from a technology standpoint. So when you look at a lot of our budgets and for a lot of regional banks who are mid-tier mortgage banks, it’s kind of a big deal to course correct when you have as many priorities already lined up and say we want to add this new service. Many of us have been working on portals like Blend and other tools like that. Adding one more item to the list is just hard. So there’s that issue.

Then there’s the second issue of: You can’t necessarily do a full eClosing in a lot of our states. You still have a hybrid process, and that piece is certainly challenging. On the home equity side, you also have some regulators who won’t necessarily accept an electronically signed home equity as a viable document for a financial institution to commit as collateral.

Now, that has changed a bit, but the requirement is that it’s a hybrid close. So some documents have to be wet signed and others can be electronic. It makes it a little cumbersome for customers to understand: “Well, we’re going to electronically close most documents except for these two really important ones that we’ll get to you.” So we’re not quite there yet on the process as consistently as we’d like to be. And then we just kind of make it easy. So doing it as part of a Zoom conference call or any number of the video options that are available now from a variety of firms is certainly getting there, but making sure that the customer feels that way as well, and that all the right follow up preparation, the actual experience, how they get a copy of it, making sure that all of that is as customer-friendly as possible is something that we’ll just refine over time and get better at it.

I think most folks put it in place because they needed that option and customers were afraid to go into a bank or some random place to sign docs. They are just nervous. So you’ve got to acknowledge that.

Max Simkoff I want to talk about predictions for next year. What are your predictions broadly for 2021 for the home lending market and how are you preparing for this?

Jay Plum We’re going to have an awesome year and we’re still going to be tops in Ohio.

[Both laugh]

OK, now that I’ve thrown out the challenge, I’ll step back from that.

I think we’re probably all a little concerned about refinance fatigue and whether or not there’s opportunities there. But I do think that there are a number of segments of the population that have not refinanced. Hard to believe, but there are still folks out there who haven’t refinanced. I also think that there are folks who have refinanced who still view a cash-out first mortgage as a superior product, and they’re going to do it again. With folks noticing all the cracks in the paint – you could probably see some behind me – and different home improvement projects as they walk around their house, they’re going to want to keep doing all of that. And for a surprisingly high number of folks, they will have the opportunity to refinance at a rate that can be just about the same as their current first mortgage, in some cases slightly less, and they will use that as they cash out option again while rates are still low.

It’s hard to sell home equity, even an interest-only payment of a HELOC when you’re looking at three percent, 30-year fixed rates. That rate will rise over the course of the year. I think the first half will be materially different than the second half. But I think the second half, particularly as we get to spring selling season, is going to feel a tremendous amount of pressure on the home purchase market. I think folks will be persuaded to list their homes because the increase in prices will be matched by continual demand.

We also have a lot of millennials who are now not just encouraged to refinance by the housing market, they are enabled to refinance by these low rates. And if we go up half a point, that’s still an incredibly great rate. There will be a lot of people who can afford a lot more house because of that rate. So I think we’ll have a really good 2021. But I would not be surprised if the fourth quarter gets a little tighter and that we see the beginnings of things declining. Our own expectation is to do a little less than we did this year.

But, you know, we’ll see how it goes. I think everybody’s expecting the market to be a little bit more normal next year. Hard to believe that we can be at $4.4 trillion this year. So it should come down a little bit.

Max Simkoff I’ve got one last question for you on predictions for next year. You might have known this was coming because it’s on a lot of people’s minds too. It looks likely that we will have a change in political leadership and how do you think that that will affect the mortgage industry, broadly, and obviously specifically this topic of GSE conservatorship, and the possibility for reductions in the forbearance realm? What do you see happening on the GSE front in the year ahead?

Jay Plum Well, I don’t think it will be likely, but I wish they would change around this Adverse Market Fee, which was just a tax. It was not the best public policy and it will disproportionately impact consumers who could use some help with their finances as opposed to a penalty with this higher rate. So I would suspect that will get at least looked at. But it’s going to be the same guy at FHFA for a while at least, applying pressure to maintain it.

I’m not sure that conservatorship is going to be a hot topic for 2021, just from a practicality standpoint, whether it’s this administration or the Biden administration, $283 billion in capital as a requirement means that not much is going to happen for a little bit. I think people will take a look at that and might stretch it out a little bit longer because it seems like we’re rushing to it as opposed to planning for it. Housing policy needs to be a little bit more coordinated than what we’ve had in the past few years. We have CFPB doing one thing and TRID and some of their rules, and we have the OCC doing a few things with banks, namely in the affordable housing area, and then FHFA seeming to be singularly driven towards conservatorship exit. And the coordination between all of them has at times not been great.

I do think that we’ll see more regulation, more pressure to do more affordable housing loans. And frankly, how can you argue against that? It’s a good thing to help people get into a home. It’s what makes the industry special. And if we can help more people, great, we should.

As far as whether or not I see compliance being a huge issue for 2021, I really don’t. I think there will be some fine-tuning. I think it’ll take a little while for compliance to become a larger issue again for many of the agencies. But I do think that we’ll see more regulation, more pressure to do more affordable housing loans. And frankly, how can you argue against that? It’s a good thing to help people get into a home. It’s what makes the industry special. And if we can help more people, great, we should. So I think some of the compliance efforts we should welcome and not shy away from.

Max Simkoff Agreed. All right. I’m going to take just a few questions from our audience before we wrap up. The first one here says: With your predictions for 2021, what are your thoughts on new ideas in keeping your colleagues motivated to continue the high volume production?

Jay Plum Well, I think that is the number one issue. You know, we have made it through 2020. Yay! But the first quarter is also going to stink. We’ve got all these folks with huge amounts of pipelines, tremendous amounts of loans per person in the back office, and just an awful lot of pressure on everyone. I think we’re going to have to get creative with scheduling. I think we’ll have to have a lot of flexible hours. I think you’ll see more job sharing because folks are just going to be burnt out. And I think somehow the industry is going to have to come around to the fact that we can’t simply recruit each other’s folks. And while sometimes that’s fine, it’s not if you’re on the side where you’re losing folks.

I think you’ll see more job training of inexperienced colleagues to be brought into the industry to help with the overall capacity, just simply because we can’t ask everybody to keep running at the pace that they’re running. It’s just too much and it’s not healthy for the colleague or frankly in many cases for the consumer, who I mean, it’s tough to just keep at this pace and keep up your standards. So I think we’ll see this as a key issue going forward. I will probably get some more costumes as well.

Max Simkoff And read some more books. Yeah, great.

And then maybe one last one here, which again goes back to the adverse market refi fee. This question is asking: What did Huntington do specifically to prepare for the implementation of the adverse market refi fee on December 1st? And how is that impacting your customers?

Jay Plum Is this a trick question? We implemented it.

I mean, we were very grumpy about it, but I think the difficult part is that we probably implemented it a little bit sooner than some of our competitors in our footprint. That impacted some of our third-party business. But it wasn’t a fee that we were prepared to eat and we have tried to make do with it as best we can. I think everybody in the industry felt the same way, that this is a tough one.

If it was a little smaller, it would have been a non-issue. But this was a big issue. And I think we’re going to have to keep this in mind as we think about some of the market segments that we serve, like in affordable housing, where if rates rise, this fee will become difficult for a lot of families and we’ll have to reconsider how we approach it at that point. But most folks have implemented it as of December 1st and that little hiccup has shown up in everybody’s secondary marketing results and just it is what it is.

Max Simkoff Great, well, we’re right at time here, Jay. Again, wanted to thank you for taking the time to talk with us today. I want to set the record straight and just make note of the fact that you were our first choice. You were not a runner up or a pinch hitter for anyone. So your insights and experience are super valuable. Really appreciate the time. And thanks a lot for speaking with us today. Enjoyed it.

Jay Plum Happy to do it. Thanks very much for the opportunity and I hope everybody has a great holiday and stays healthy and safe.

Max Simkoff Absolutely. Take care, everyone.

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