This piece originally appeared in the October 2022 edition of MReport magazine, online now.
Kristy Fercho is the EVP and Head of Wells Fargo Home Lending, where she leads a team of mortgage professionals in sales, operations, servicing, capital markets, portfolio management, and related business, risk management, and supporting functions. Having taken on this role in August 2020, she has helped navigate Wells Fargo’s Home Lending segment through the challenges of the pandemic and the emergence from it, all while being the only Black woman to lead a national mortgage company (as well as the largest bank originator in the country).
When her Wells Fargo position was first announced, Mike Weinbach, then CEO of Consumer Lending at Wells Fargo, called Fercho “a customer-first business leader with deep home lending experience.”
Fercho recently took the time to speak with Five Star Institute Editor-in-Chief David Wharton to discuss the challenges of being a prominent woman leader in a male-dominated industry, her top accomplishments over the first two years at Wells Fargo, and how her career has taught her to gain insights into “how people tick.”
Two years into your leadership at Wells Fargo Home Lending, what are the victories and accomplishments you’d most like to spotlight?
I think the biggest win is helping the customers through COVID forbearance. When I came in August of 2020, the foreclosure crisis was in full swing at that point. The MBA data showed that 8.5% of mortgage servicers’ volume went into forbearance at the peak, which is about 4.3 million customers. Wells Fargo had over a million customers enter forbearance and that’s significant. We helped those customers understand the forbearance programs going in, and now, 18 months later, we’re helping them understand their options to exit and bring their mortgage current, and that has been extraordinary. It was a Herculean effort across the industry, and I’m proud of our industry because, even coming out of the last housing crisis, servicers got a bad rap about how that was handled. This was the first big test since that time.
As an industry, we stepped up and delivered something unprecedented. Just being able to ask for COVID forbearance without having to demonstrate hardship was unprecedented for the industry and the fact that we just leaned in, figured it out and provided assistance to those in need is a testament to the industry.
We’re back to historically low default numbers as a result of it. That’s the first win that I have to highlight. These last two years have been extraordinary on that front, dealing with COVID and all that came with it.
The second win I would call out is shifting the culture. When I first came in, like any new leader, I assessed, what was Wells Fargo Home Lending? What were we going to be? What did we stand for? I did this full assessment of the landscape, and then, in January 2021, I rolled out the new mission, vision, strategy, objectives, and strategic priorities for the business.
One of the things we wanted to define the culture was providing care for our customers. It was inspired by Kara Lawson, who is the Duke women’s basketball coach. She had posted a video online about the difference between working hard and competing and it spoke to everything that we were trying to do in Home Lending. “COMPETE” is an acrostic, which takes our strategy and objectives and spells it out into specific behaviors and goals that we’re going after, starting with the C–Care for our Customers.
All around Home Lending, you hear people talk about this mindset to compete for the Wells Fargo customers; to make sure that the customers have a great experience and that we win their business every day through great customer service, a great overall mortgage experience, and a relationship that builds trust. It’s broader than the transaction of the mortgage, because as the largest servicer in the country, we just entered a 30-year relationship with our customers, so thinking about it as a relationship, we get to understand their financial needs and help meet those needs through their home lending experience.
Before Wells Fargo, you were at Flagstar, and you also worked at Fannie Mae, and, going back to the beginning of your career, you were with PepsiCo. That’s an interesting path. What did you learn from those different organizations and positions that prepared you to lead Wells Fargo Home Lending during such an unprecedented time?
I definitely had a non-traditional path into mortgage banking. I started my career in health care, went into consumer products, and have been in financial services now for the better part of 20 years. The consistency throughout those different industries has been my deep understanding of the customer. At every company, there was a customer, whether it was an internal or an external customer, that had needs to be met. So I worked hard to understand the person, their motivations: how to create a product, solution, or experience, that allowed us to meet the needs of the customer in a way that would maximize our business objectives.
That’s been the consistency throughout my career: tapping into what makes people click, and then figuring out how to get the best out of them in service of an end customer. Being able to meet core customer needs has been at the heart of everything I’ve done.
I’m very fortunate to be in Home Lending and to have been able to do that now for the last 20 years. The notion of helping people achieve the American dream of homeownership is an extraordinary privilege.
With American homebuyers facing challenges ranging from affordability and inflation to ongoing supply-chain and personnel issues hampering the building sector, what are the primary issues you and your team are focused on as we head into 2023?
The velocity with which we shifted from the incredible low interest rates and record origination environment over the last two years, into this smaller origination market with a higher interest rate environment, is what’s stunning to people. Basically, in a quarter, we flipped from a strong refinance market to a purchase market. So, the primary challenge is right-sizing the capacity of our business to the market going forward, and doing so in a thoughtful and intentional way that still allows us to provide a great customer experience without sitting on excess costs.
The second issue is dealing with the supply and affordability challenges in this purchase market. While home prices have come down year-over-year nationally, the appreciation over the last two years have priced some people out of the market. And the rising interest rates from the Federal Reserve are only making affordability worse. You pair this with the significant supply challenges that are a result of lack of new home construction from the last crisis and you have people sitting on the sidelines.
These factors create a smaller, more competitive mortgage market. The Mortgage Bankers Association reported that net production profits in Q2 dropped to its lowest level since Q4 2018.
Along those lines, Bloomberg reported in August that Wells Fargo had plans to scale back its mortgage business, reportedly in response to the shifting market as well as previous scandals the bank had been navigating in recent years. Could you comment on those changes?
There’s no doubt today’s market is creating headwinds for companies across the housing finance sector. But Wells Fargo is committed to supporting our customers and communities through our Home Lending Business.
Like others in the industry, we’re evaluating the size of our mortgage business to adapt to a dramatically smaller originations market. And as we do that, we’re going to continue to look across the company to prioritize and best position us to serve our customers broadly.
These efforts are consistent with our deep belief in the dream of homeownership and the role Wells Fargo plays in helping to make that dream a reality for the millions of customers we serve.
In your opinion, what are the most important qualities of leadership when facing headwinds like the industry is weathering right now? How do you motivate and guide people through those storms?
One of my favorite books is Good to Great. In the book, Jim Collins talks about the Stockdale Paradox. Admiral James Stockdale was a prisoner of war [during the Vietnam War]. The Stockdale Paradox was about confronting the brutal facts and reality of your current situation but maintaining this unwavering confidence that you can and will prevail in the end. That’s how I approach life so I think that’s why it resonates with me so much.
I engage and motivate my team going back to our core mission, vision, and strategy and keep them focused on how best to compete for our customers every day. While it’s tough right now, we’re going to continue to push through.
It’s optimism. It’s tenacity. It’s grit and passion. I believe deeply in my team and the work we are doing to serve Wells Fargo customers. It’s about motivating them through this time but also keeping them focused on the core work, which is our mission, vision, and strategy, and how to keep delivering those results.
Who are the mentors who have been instrumental in shaping your career?
I’ve had so many great mentors in my career. I’ve been very fortunate in that way. One of the leaders was Dan Mudd, who was the CEO at Fannie Mae. Dan was a Marine, so there was an incredible followership that Dan engendered in his leaders because it was about camaraderie, integrity, honor and the belief that we are better together. That was something I took from him. As a leader, I subscribe to the “servant leader” philosophy. I am nothing without my team. It’s about building the best team around me and working side-by-side with them to achieve our goals.
Could you speak about the challenges of being a Black, woman leader in a predominately white, male-dominated industry? What have been your challenges, and how do the lessons from those experiences give you insights into helping Wells Fargo address issues such as minority homeownership gaps?
There’s no question, this is still a very male-dominated industry. This year, being the Chair of the Mortgage Bankers Association, I’m the first Black [person] and only the fourth woman in the 108-year history of the organization.
So, on one hand, I’m proud that I’m the first Black [person]. We’ve achieved that now, and once you have one, then it makes the next one easier. So, I do think that we’ve made progress, especially for women in the last 20 years. I think the trajectory is strong, but there’s so much more work to be able to do.
I have definitely faced challenges but I’ve been very fortunate in my career to have had great mentors who saw potential in me and gave me opportunities to be able to grow and shine. I try to use being the only woman and the only Black [person] in the room as my advantage, because when you’re the only one in the room, you stand out. So, you might as well stand out through contributing in a meaningful way that people will take notice of your contribution. I’m willing to take risks, and I think that has contributed to my success.
As to the second part of your question, I am, similar to my MBA role, the only Black woman leading a national mortgage company. The fact is, I happen to be leading the largest bank originator in the country. With that, I feel an incredible responsibility.
When you look at the history of redlining and at Black homeownership rates continuing to lag, these are very sad facts to me. So, as we think and strive for racial equity and homeownership, the burden is on lenders. Certainly, we fill that burden at Wells Fargo as the largest bank originator. We believe that, as an industry leader, we have an obligation to help create solutions and lead the way. This summer, we launched our first special-purpose credit program, focused on Black customers in our servicing portfolio who may not have refinanced during the low-rate environment. Wells Fargo is committing $150 million of our own money to offer refinances at reduced interest rates for eligible customers and pay for all non-recurring closing costs and lender fees on those customers’ behalf.
I think that’s just the beginning. There’s so much work to be done around appraisal bias, alternative forms of credit and credit-scoring methodologies, and different products to be able to meet the needs of these communities of color that we need to continue to lean on.
We’re evaluating all opportunities at Wells Fargo, including understanding what some of those systemic barriers to homeownership are.
Through our foundation, we’ve committed $60 million to funds grants, in eight different markets, to develop solutions to the root causes of that disparity, and put these ideas into action that start to change local communities.
We’re trying to lean into the questions of how we can help advance this whole notion of racial equity, but have it not just be an idea—to have it truly be an actual, tangible result where we create more homeowners.