Fifth Third Bank’s Jay Plum explores Basel III, upcoming lending trends

Jay Plum: We like mortgage. We’re committed to mortgage. Our customers view it as a core product, and so do we.

We have a retail distribution channel, a direct-to-consumer model — both phone and internet — and then we have a large national correspondent business. So, all told, we have a variety of ways to get in touch with our customers and collect more for the bank.

Diego Sanchez: How do you prioritize approaching those different channels in terms of priorities in business, staffing, resourcing?

Plum: We’re the tenth-largest bank servicer in the country. We’ve bought MSRs, and that’s purely an economic play. The immortal role of buying low and selling high applied when we bought MSRs when they were at 3% and 4% interest rates. We’re enjoying that now. As far as our other channels, we believe that professional sales matter.

Later on, the conversation shifts to discuss Fifth Third leaving the warehouse lending business.

Sanchez: Can you talk about why the bank made that decision?

Plum: We weren’t excited about it. The reason we left was because of the proposed Basel III rule change. It’s important to discuss that a little bit, because even though we’re a bank, this Basel III proposed rule really impacted the entire mortgage industry. It made our MSRs more expensive, and it made things like warehouse lending a much more difficult business.

It’s important for regional banks and IMBs to understand that this Basel III rule was gonna affect them directly or indirectly by reducing liquidity for what we did with warehouse and like a couple of other banks did, as well as with different changes in MSR liquidity.

Sanchez: So, I think mortgage growth in 2025 means you’re taking market share. Are you planning to take market share in mortgage in 2025?

Plum: We’re definitely gonna take market share, and we already are because service wins. No matter what part of the industry you’re in, you gotta take care of the customer.

Plum recalls Diego’s previous point on housing affordability suffering under high interest rates.

Plum: Your point about high rates is correct, and it certainly has made everybody in the industry a little grumpy to expect rate reductions. The bigger concern is that we’re seeing higher for longer with higher home prices. So, affordability is affecting parts of the customer base that you wouldn’t think would be impacted.

We need to be careful about that. Whether it’s a down payment assistance program or adjusted fees, and hopefully it’s regulatory and GSE changes, we need something that allows us to pass savings onto customers.

To end the conversation, Plum explains Fifth Third’s strategy for moving mortgages into its MSR portfolio.

Sanchez: What is an ideal percentage for you in terms of the mortgages you originate moving into your portfolio?

Plum: I could give you a percentage but it honestly changes based on rates and what the market demands.