DAVID LALLY: Welcome to “The Brian Buffini Show,” where we explore the mindset’s motivation and methodologies of success. My name is David Lally. I’m the producer of the show, and I know we may be in challenging times, but that’s just why we’ve been working on shows to keep us upbeat and focused on the good stuff. Let’s listen in.
BRIAN BUFFINI: Well, a top of the morning to you and welcome to “The Brian Buffini Show.” Today’s guest, a man I’ve known for a number of years, his name is Michael DeVito. Michael has a big job. He’s the executive vice president and the head of Wells Fargo Home Lending. Michael and his team oversee the nation’s leading combined home lender and servicer. They fund one out of every nine loans in the country and they’re servicing one out of every seven loans in the country.
We needed to get some straight talk on the banking side. There’s a lot of misinformation out there in the marketplace, so we thought we’d go straight to the top of the wagon, if you will. Michael, thanks for making the time to be on our show today.
MICHAEL DEVITO: Brian, it’s great to be with you. Thanks for the opportunity.
BUFFINI: You bet. Well, I want to dive right in because we were talking offline. There’s a lot of misinformation and when you start listening to the media or seeing how the media reports things now, it’s like watching sausage being made. Once you see it, you don’t really want to eat it. We really wanted to come to the source and you guys are obviously just such a leading player in the space. We’ve had our partnership for almost 10 years now. I just wanted to bring some stuff to the forefront here.
Let’s just go to the most basic stuff and then work our way out, because again, I’ve seen lots of articles about this subject. Let me ask you this. Are Wells Fargo and other banks able to process mortgages at this time?
DEVITO: I absolutely believe so. I can show you in our numbers. We’re open for business is the way we think about it, Brian. We have to adapt to what’s going on in local markets. We have to recognize that there’s shelter-in-place and other things happening that have changed the way we do business, but we’re absolutely open for business and serving customers. In the month of March, we served more than 50,000 customers in both our retail and correspondent business. We took 64,000 applications from customers in our retail origination business, just in the month of March. We’re busy and we’re definitely open for business.
BUFFINI: Obviously, the rates are at just historic lows. Right now, people need to save a few bucks. One of the ways to save a few bucks, I just had my son do a refinance on his home a few weeks ago and he saved $350 a month, which is a lot of money right now in the current environment. Are you guys able to do refis? How are refis working? Are you getting tsunamied? Are you keeping up? What’s the state of the union with regards to getting a refinance done?
DEVITO: We’re busy. There’s no question about it that we’re busy and about half of our business, if I look back at March, about half of our business was refinanced. I think if I looked at it today, in the middle of April, it’s probably even a little bit more than that. We’re taking record volumes of applications every day. One of the great things we’ve been able to do here over the last several weeks, is transition our team in a way where we’ve got the vast majority of our team members working remotely, and doing it in a very productive way.
Over the last three or four weeks, we were able to migrate many of them to work from home. We’re processing and underwriting loans in remote ways, in ways we never even imagined we would be doing it. We’re inventing new ways to do it every day. From my perspective we’re open, we’re serving customers. It’s a little different, but it’s working.
BUFFINI: How’s appraisals working right now? I’m hearing words of drive-by appraisals and this and that. How’s that working?
DEVITO: When we saw these shelter-in-place actions happen state by state, we took the step to basically do exterior only, drive-by appraisals, but for the most part it’s an appraiser doing a full evaluation but not going in the home, so that’s different. It limits some things in some ways. It limits our ability to do some really high LTV lending in some cases, but for the most part Brian, we’re still serving customer, we’re still doing purchase transactions and still serving customers at a pretty high clip here. We’ll roll that back as it becomes okay to go back in people’s homes again. When everybody’s comfortable with that, we’ll be ready to take it back
BUFFINI: We’re putting together a bunch of protocols for agents, and what to do, and little things that we have agents doing now and they’re doing antiviral cleaning of a house, and specific ways they’re doing. We have a lot of people doing business. We have a lot of people doing business all over the country. As of the time we’re on this call today, 24% of the counties in the United States don’t have a single case. Real estate’s always been local. We have to deal with things nationally. Governments have to do things, governors have to do things.
Right here in San Diego, we really haven’t seen the vibrant outbreak. I talked to three CEOs of hospitals yesterday, and one of them had five patients in ICU, one had three, and one had one. Big hospitals, so it depends. That’s not the story in LA, and obviously New York, New Jersey, hard to go after those people in Massachusetts , there’s some real hardcore stuff going on downtown San Francisco.
We have to be careful about all of these things, but we have a lot of people selling homes, and we have a lot of people being very creative and very inventive, and as I mentioned to you, we’re coming up with a program called a rolling start, which is getting people in a spot, like in NASCAR. When you start from a dead start in NASCAR, you break the engine, the car gets torn up, car crashes. They have a rolling start where you go around, they restart the race, they have a pace car, you get the car, you’re going to get the tires warmed up and you get the engine running.
We’re doing a little thing called a 5 Circle Fit program to get people in all areas of their life, get the body moving, get the mind moving, get the heart going, and then get the business going. That way when the pace car gets pulled out of the way, you can safely get up to speed with as little damage as possible. We talked about it, like you know the market and people are going to be cagey at first and so on and so forth, but one of the areas that I really see very specifically growing out of this is real estate.
We had a housing shortage going into this. We still have a housing shortage, the stay-at-home orders. What we’ve seen is a lot of people have found out that their home is not just their castle. In some cases, it’s their sandcastle and they’re bouncing off the walls, going, “Man, I want to move.” We’re going to see a lot of interstate movement. I know that’s coming. 35% of people plan a home improvement project the next 90 days. There’s this big dynamic changing.
Now obviously, there’s big economic tests coming up here and one of the things that people are, and I was interviewed earlier this morning, and a person asked me in a media outlet. What it looks like, we’re heading exactly back into what happened in 2008. Of course, when you do these media interviews, they don’t give you the time to give context. I just had to say, “That’s not happening.” We are not heading to 2008. The banking is different, the structure is different. We’re not going from 7.2 million sales down to 4, that’s not what’s happening here.
It’s hard to build a case in a short amount of time. The doors are going to open here, but there are some challenges. Now, your bank, along with every other bank has been, since the great recession, has had to do stress tests and balance sheet work and so on, so forth. Maybe you could speak just a little bit and give people some confidence about the state of the union as far as the overall well-being of the banks.
DEVITO: Well, I think if you look at the financial system today, there is much more strength today than there was 10 years ago. Think about 10 or 12 years ago going into the last financial crisis. Since that time, every bank in the country, and definitely the large banks, have had multiple stress tests, higher levels of capital that we’re required to hold, liquidity ratios that we’re required to hold. You’re seeing it in first quarter results that are being reported by all the institutions.
You see everybody’s above their capital limits and liquidity limits. The good news to this situation is that you have a financial system that’s able to lean in and help. Unlike maybe the last time around where the financial system was not as strong and not able to be a source of strength. I think that financial system, and specifically Wells Fargo, we’re doing all we can to be part of helping a country from an economic standpoint and do so from a position of strength. We’re going to continue to try and find ways to do that.
BUFFINI: Well, that’s good. Like I said, I think it’s just important for people to know, the whole thing is not caving in. I keep reminding people that 50 days ago, we had a record jobs number. 50 days ago, record job number. We had over 100,000 more employed than we expected in February, with the lowest unemployment in our history. February of 2020 was the highest sales number in 13 years for residential home sales.
It’s 50 days ago. You talk about the NASCAR. Obviously, we know there’s been a big pile-up here, there’s been a big crash, everything stopped. Restaurants, and everything we know, and going outside, and all that great stuff, but the game is changing. One of the things I would like to talk about is we know the door is going to open, it’s going to be this staggered effect. In the meantime, banks have got to manage what they manage and do what they do. JP Morgan just announced two days ago that you’re going to have to have a 700-credit score, and you’re going to have to have 20% down to get a loan with them. Is that something we’re going to see with Wells Fargo in the future?
DEVITO: We’ve worked really hard to keep our lending practices about as consistent as we can make them. We have made a couple of changes, but we thing they’re prudent and they’re appropriate for the environment. I mentioned one already, the appraisal change to do exteriors while we’re still working through protocols to be able to ask people to open their home or not open their home.
We’re continuing to serve the purchase market in a very broad way, Brian, and I think that’s really important for your listeners to know. We’ve not put any restrictions on the GSE loans that we’re originating. We’re doing high balance lending, we’re doing purchase lending in the jumbo space. We did take the very highest LTVs down just a click in the jumbo space, because of the access to the property, as I said, in terms of being able to value it, but in the purchase market we’re very much open for business.
In refinances it’s true too, with maybe one exception which is for jumbo lending in refinances, we reserved refinance based on jumbos for our very best enterprise customers. Because there’s a lot of market demand, we got to prioritize who we’re serving. We chose to do that. The customers who do business with us in multiple ways see us as their relationship bank, and have deep relationships with us, we want to be able to serve them. We got to manage our balance sheet.
From that perspective, we’ve done a few things, but we have not walked away from the middle-of-the-market, and the average homeowner who’s trying to go buy a home, we want to be there to support them. We think it’s really important to support the purchase market, because that’s where values get established. When you have a buy-and-sell transaction, that’s how values get established and markets stay stable, and we know that we need to provide support to that, so we’re doing all we can to do that.
BUFFINI: That’s great. It’s actually the reason I initially reached out and said, okay, we had our team get together and say, I’ve got to get Michael on the podcast here because I saw three major financial outlets, the three major, on TV, I saw over a dozen press releases and it said, Wells Fargo, Bank of America, whoever else, no longer making jumbo loans. That’s just how it’s left.
DEVITO: That’s not right. It’s not true. We’ve changed some things but this idea that we’ve turned it off is — now, I will say we did suspend buying purchase loans from correspondent lenders. We’re not buying jumbo loans from other lenders. We were doing some of that. It wasn’t the majority of our jumbo business before and we’re not doing that, but our retail business, we’re still making jumbo loans in a very significant way.
BUFFINI: Great. That’s why we’re doing this, Michael. I think it’s a great lesson for everybody listening on all subjects right now is, I think we can extend some grace all the way around where people are doing the best they can. Reporters are reporting what they have, and you got to measure twice and cut once. There’s a lot of people are fearful. There’s a lot of people are under anxiety, a lot of people are straining at home. There’s 22 million unemployed people since that great jobs report, the 29th of February. There’s a lot of anxiety in the marketplace, but little bits of information are very, very dangerous things.
Like we’re talking about here, I wanted to come to you as a source and go, are you guys making jumbo loans? Yes. Are you guys doing purchase loans? Yes. Are you guys doing refinances? Yes. I’ve seen every one of those things reported, not just about Wells, but of all kinds of major institutions that are just saying it’s like everything’s shut down. I saw one article, and again you look at some of these things, and I chased it down and it was some 25-year-old and this thing got blasted all over kingdom come, Wells Fargo can’t process loans because San Francisco shut down. I don’t know where this kid is. Is he from a party, did he do it from his phone? The world we live in today and many things like that.
DEVITO: To your point about the grace. These conversations take context and it’s such a tremendous opportunity to spend some time with you and be able to share it because the context matters in trying to help people understand the decisions we’re making, and why we’re doing what we’re doing, and where we are open for business, and the choices we’re making. It’s hard. I’m not apologizing for poor reporting, but I think it’s difficult. The access to the facts is hard to come by, and they’re under such– everybody feels this pressure to go fast, that they’re not taking the time to really study the issue. That’s why it’s great to be able to have a deeper conversation.
BUFFINI: For sure. Let’s do this. You don’t get to a big job like you’ve had, that’s overseeing the size of the American market. One out of every seven loans, and one out of every nine new funding loans, every year. It’s a giant piece of business. It’s a giant piece of an economy. I look at the size of Wells Fargo as a company. It’s almost, it’s like 70% of the Irish gross domestic product. When I’m dealing with Wells, I feel like I’m dealing with the government. You guys are a big group, it’s a big deal.
It’s huge. Just in the size of the economy, it’s like California is a huge economy as a state. Here’s the thing, you’ve been around the block a long time and we have a lot of Wells HMCs listening to us. We have obviously a ton of realtors. We have hundreds of thousands of consumers. You’ve been around the block a few times. You’ve been through recessions. You have a few gray hairs at the temple, because you’ve been there, done that. What’s your advice for people at this stage of the game? You’re running a big-time team. What’s your advice for people who are living this at this time, trying to make financial decisions? Looking at the housing market, what advice do you have for them just as a person?
DEVITO: Well, I think there’s a lot going on in the marketplace and for me, I find it best to just sit quietly and prioritize. For me, those priorities become pretty straightforward. Take care of yourself and your family. Try to take the long view and avoid allowing the environment to infect your thinking. There’s more than one way to catch the virus. You can catch the respiratory version of the virus, you can catch the thinking version of the virus where it’s all you’re thinking about all day long and it’s not necessarily going to be helpful.
The other side of it is, be open to the idea that this environment, it will present new opportunities. It may not be the opportunity you plan for. I know our business plan in the second quarter of the year doesn’t look like what we thought was going to look like when we started the year. It may not be what you planned for, but it’s going to be an opportunity all the same.
I want to share a really brief story. I had this unique opportunity a few years ago. I spent a day at the Navy SEAL training facility in Coronado, California. I was invited to come. Wells Fargo donated a home to the Navy SEAL Foundation and I was there to present the home to the command. They gave our team and me a tour of the facilities. We had a briefing from the command, we met with some service members, we learned about the training, we got to ask a bunch of questions.
I asked a question that day, what distinguishes a successful SEAL? What makes them unique? What distinguishes them? The answer was fascinating to me. It was the ability to assess the situation and rapidly adapt, and constantly repeat that cycle, assess and adapt, assess and adapt, and repeat, and repeat, and repeat. On the plane ride home, I bet I made 10 pages of notes of the people I talked to and what I learned and everything, and just trying to apply it.
I’ll tell you, I’ve been thinking about this trip to San Diego and this visit and the ability to ask those questions that day. I’ve been thinking about that every day for 50 days. Since this really started rolling and taking off, how do we assess? How do we adapt? How do we take in facts, sort out the facts? How do we make good decisions with them, come back and assess the situation again the next day and every time the situation changes, assess it again. I think that’s what I’ve been trying to say is take good care of your family, try to take the long view, try to gather as much information as you can and assess and adapt.
The world’s not going to go back to what it was, it’s going to go to something new, and there’ll be new opportunities as a result of that. The most adaptive of us, the most adaptive companies, the most adaptive teams, the most adaptive people, they’re going to be the winners. They’re going to be the people who succeed.
BUFFINI: Hooyah as they say in the SEALs. Hooyah. Absolutely, that’s great.
BUFFINI: That’s great. You guys have been adapting and I want to talk about this. Obviously, we had Dr. Ben Carson on from HUD. He talked about forbearance and he talked about reaching out with the banks and so on and so forth. Some folks are having a hard time, and the banks have stepped up. I saw the announcement here in California, because we serve — there’s a lot of consumers listening to this, there’s a lot of homeowners listening to this, but we also have the most productive network of real estate agents in the country that are selling a giant amount of the properties. They need to go talk to their customers.
Some folks have lost their jobs, some folks have had a tough time. We’ve got forbearance, in some cases, we’ve got banks like you’re doing deferment programs in certain states. Can you talk a little bit about, if somebody’s been affected directly by COVID, and they have a Wells Fargo mortgage specifically, what kind of help is available for them?
DEVITO: The first thing they should do is get in touch with us, and we can talk very specifically about what we can do for them. We’re encouraging customers who can and who have not been impacted to continue to make the mortgage payments, but if you’ve been impacted, if you’ve lost your job, if you’re taking an income reduction, some material impact that’s created a hardship, there are 90-day forbearance payment suspensions available.
Then through the CARES Act, you can renew that if you have that need down the line, but it starts with making contact. For us, we’re taking thousands of phone calls every day. I will admit, the first couple weeks of this, when we were trying to do social distancing inside our work environment, and trying to serve increased call volume, and trying to do all those same things at once, our wait times were a little long.
Today, we’ve got our teams working from home, split between home and here. We’re doing a nice job of handling call volume. You can go on our website on wellsfargo.com. You can send us an email, you can respond to a web form that tells us what’s going on, and we can help you directly. Across the bank, and across all the products in the bank, we’ve helped over 1.3 million consumer and small business customers defer payments, waive fees that goes well beyond mortgage. Significant share of that are mortgage customers but it goes well beyond that.
I think we’ve been waiving fees and deferring payments and trying to lean in and help customers where we can, because as you said Brian, there’s 20 million people unemployed, they need help and we want to help them, so we’re going to do our very best to help them.
BUFFINI: I know in the last Great Recession, one of the issues we faced was people who were not behind on their payments and struggling, the number one dynamic was, I remember the stat that said 54% of the people who went into foreclosure never contacted their lender once. When the details came out, they were embarrassed. I just think right now, if you’re struggling, like I’ve never taken a dime in my life from any government program in the world. Right now, the government’s shut everything down and they’ve had to. There’s just no other way around it and it’s nobody’s fault. It just is what it is and there’s no reason to be embarrassed.
The bottom line is, like you say, you guys have already helped out 1.3 million customers. That’s amazing and I think there’s a lot of stuff going on, and obviously there’s things you weren’t able to do. There’s issues with everybody. I know there were some problems with the PPP and businesses over 50 and so on, so forth. Like I say, assess, adapt, everybody’s got to do the best they can and figure it out. Now, as you look at this, because people are asking the question, are the payments put to the end of the mortgage, is that’s how this thing is working for most people in the deferment.
DEVITO: We’re working through that now with all of the investors. We been talking, matter of fact, we had conversations earlier today with Fannie Mae and Freddie Mac, we’re talking to HUD about their plans. They just announced what their plans are going to be. For the most part, I think the way this is going to work is when you’re ready to go back to making your payment, you’re going to be able to take the forbore payments, the deferred payments, and add them to the end of the loan. That’s the design we’ve been advocating for, especially for people who recover and come back and make their payments.
Now, if you get to a place and you say, “I can’t make that payment. I’ve got a hardship, but I can make a different payment,” that’s going to be a different story. Now you’re talking about renegotiating or modifying the loan. We’re going to have to work through those, but the design we would like, and what we’re advocating for with Fannie, and Freddie, and again with HUD, is that we ought to be able to take these and add them to the back of the loan where we can. We’re going to wait to give all the final details as we get them from investors who really write the rules here.
At Wells Fargo, that’s what we’ll do for the loans that are on our balance sheet, but for Fannie Mae loans and Freddie Mac loans and HUD loans, we have to follow their rules. They write the rules, we service to their standards, and we’ll follow through. When we’re talking to people today, we’re able to tell them what we can do for them now, and we will have to come back and tell them as we get final details of what that looks like over time. We’re pushing hard because we keep saying to people, 90 days goes by in a hurry. We want to be able to give people real answers, so we’re pushing hard.
BUFFINI: Great, so stay tuned and we’ll try and get the information out as well. I think whether you’re a Wells Fargo customer, whether you’re any other customer, if there’s a problem, if you have a customer who’s got a problem, have them call their bank, have them call their loan servicer and let them know, and at least give them a heads up. There’s nothing to be embarrassed about. Get the word out.
This has been great. I think it’s very informative. We’ve cut through a lot of stuff here. Like I said, we are going to assess this. I actually had a gentleman I’ve known for a very long time. He’s had serious medical conditions for a while. He got COVID and he passed, and I had a chance to talk to him and he said, “You know Brian, I’m not feeling great right now, but I wasn’t feeling great 90 days ago.” He said, “There’s a number of us are not going to make it and I’m maybe one of them.” He says, “You guys got to live. You guys, you got to live.” He said, “This too, going to pass and you got to live.”
I was bummed out, obviously, I’ve known this guy a long time, but yesterday I heated up the pool and we had a nice day here in San Diego and all the family got in. We put the music on outside and I stopped working early. I’ve been working like a banshee and everybody, we went and swam for an hour, and you know what? It’s like, it’s still a good life. It’s still a great country. Real estate is still a beautiful business and this too shall pass, and we’re going to help people get a rolling start and get the ball rolling.
People are going to be very creative in how they do showings and how they get things done. Different parts of the country are going to open up in different ways, but real estate is going to be there. I’m looking forward to getting the doors open. Any final words you have for our folks here today as we sign off, Michael?
DEVITO: Well, I think you’re exactly right. What we know Brian, is people want to be homeowners. We know they want to own homes. When you think about that, there’s just this desire to have a place for your family and a place to gather. We’ll do that again, we’ll be gathering with family and friends again, it’s just going to be a window of time, but we’re going to do it again. I agree with you that I continue to be bullish on real estate and we’re going to be there to help. It’s a pleasure and a privilege to spend some time with you and your listeners, and thanks for the opportunity.
BUFFINI: Well, keep chipping away, one day at a time. I think you really helped a lot of people today and cleared up some misinformation. We’re going to keep bringing the truth and I think it helped a lot of folks today. Thanks so much for joining me.
DEVITO: My pleasure, Brian.
BUFFINI: Well thanks so much to Michael DeVito and again, it’s nice to put a face on top of these big banks. We all have these opinions. We’re putting faces on big associations like the National Association of Realtors. Carson put a face on government. It’s different when it’s a human being. I think when it’s a human being, there’s an opportunity for respect and understanding. I hear numbers like we’ve helped 1.3 million consumers. It changes my perspective on the challenges I see at the same time. It’s good stuff.
I think great word there today is to assess and adapt. That’s the Navy SEAL way. We pride ourselves at Buffini & Company of being the Navy SEAL training company, and we’re producing Navy SEAL-type realtors, people who are the best of the best, who also have great hearts and here to serve. For those of you who are looking to become a Navy SEAL, leaning in his couch, maybe go and get a Buffini & Company training because remember it’s training that makes those SEALs the best. I think this was very helpful today. I hope it’s beneficial. I hope we able to share this with your customers, to be able to give them some help, and some relief, and also some hope.
This too is going to pass. There’s an awful lot of very disciplined, detailed and determined people out there who are hopeful for the future. Thanks for joining me today and as my mother always says, may the roads rise up to meet you, and may the wind always be at your back. May the rain fall soft upon your fields and the sunshine warm upon your face. Until we meet again, may God hold you and your family in the hollow of His hand. We’ll see you next time.