Though Fifth Third Bancorp has long touted its decentralized structure as a strength in retail banking, it has moved in the opposite direction to get bigger in wholesale mortgage lending.
In September the Cincinnati company hired Bob Lewis, who worked at Wells Fargo Home Mortgage for 16 years and headed its wholesale division for the last eight, as a senior vice president to create a single wholesale channel and expand its wholesale business.
Previously, Fifth Third did its wholesale mortgage business through its 19 regional banking units, or “independent affiliates,” as the company calls them. Each of these units has its own management team and board.
Now the company has formed three wholesale lending sales divisions: the West, the Northeast, and the Southeast. It has set up three fulfillment centers that do things like underwrite loans and perform closings — tasks previously handled by the regional units — and it plans to have three more by March 31.
Mr. Lewis said in an interview last week he is on track to triple the sales force from September, to 110 account executives and 220 support staff by yearend, and quadruple the roster of broker clients, to 6,000. His goal is to originate $4 billion of loans this year, double last year’s wholesale volume.
Fifth Third is offering prospective account executives a “very competitive compensation plan” fully based on commissions, Mr. Lewis said. The division is selling itself as a “ground floor” opportunity at a big, stable banking company, he said.
Others from Wells Fargo have followed Mr. Lewis.
David Olson, the president of Wholesale Access Mortgage Research and Consulting Inc. in Columbia, Md., said, “It’s a good thing they’ve created this channel, because wholesale lending is hard to do, margins are very thin, and if you don’t do it right, you won’t be making any money.”
Nonetheless, now may not be the best time to bulk up in wholesale lending, Mr. Olson said.
The fact that Toll Brothers Inc. cut its guidance last week for home deliveries in the fiscal year that began Nov. 1 indicates that there is “some weakening of the market,” he said. “In 2003, there were fat margins, and anyone could make money. Now we have thin margins and it’s harder.”
Mr. Lewis said Fifth Third wants to do more wholesale lending because about 60% of the industry’s originations are done by brokers. “If you’re going to be a major player in the mortgage business, you have to serve the broker segment.
“When you get someone focused on something, no matter what it is, you will have a bigger opportunity to grow it because you have the manpower dedicated to it,” he said.
