Making homeownership accessible to all Americans
For National Homeownership Month, a discussion with the head of Wells Fargo Home Lending Kristy Fercho.
Editor’s note: Kristy Fercho joined Wells Fargo in August 2020 as the head of Home Lending. For National Homeownership Month, she discusses Wells Fargo’s commitments to addressing inequity in homeownership, the current housing market, the lasting effects of the pandemic, and more.
Home has always been important — “there’s no place like home” — but this past year, being forced to stay inside, home is everything. Home is synonymous with safety, comfort, family, and protection. The benefits of homeownership are stability, the ability to build wealth, to lay down roots, and build community.
Purchasing a home is the single largest financial purchase that many of us will ever make, and one of the best wealth building opportunities that we have in this country. By and large, the increase in equity and the home price appreciation over the life of a home can be substantial. Investing in something that you can accrue for future generations is what's powerful about homeownership.
Having that be accessible to all Americans to participate in is absolutely critical. The very notion of “the American dream” suggests it should be accessible to all.
The racial homeownership gap is at its widest levels in history. There’s an opportunity for the industry to come together and help make that dream more equitable for all. Lenders, the administration, and nonprofits must all work together to address these issues and bring real solutions to the table.
From a lender standpoint, Wells Fargo is working to understand the needs of each community by being on the ground and building trust. This allows us to develop products and solutions that meet the needs of communities. We are bringing programs like NeighborhoodLIFT® to communities where we work with local nonprofits, and offer down payment assistance and closing cost credits to get people in homes. We support these nonprofits to deliver credit counseling, financial literacy training, and education on improving FICO® scores. We also put owning a home within reach with options like our Dream. Plan. Home.SM mortgage and closing cost credit, which offer a low down payment and a $5,000 closing cost credit for eligible buyers in available markets.
In 2017, Wells Fargo made a 10-year, $60 billion commitment to increase Black homeownership, and so far, we've helped 72,000 African Americans become homeowners. This is in addition to the 10-year, $125 billion commitment Wells Fargo made in 2015 to Hispanic homeownership financing. We are proud to be the No. 1 funder of home purchase loans for African Americans, Hispanics, and Asian Americans as of 2019, according to HMDA data.
It was pretty extraordinary. The low interest rate environment fueled one of the largest origination markets in history. The industry achieved these record volumes while more people were working remotely due to the pandemic. It speaks volumes about the resilience of our employees and the resilience of this industry that when called upon, we rose to the challenge. We had to innovate new ways of doing things, be flexible, and really leaned into and accelerated it.
It was challenging and overwhelming at times, but we ended up helping a record number of customers have a new place to call home. And that's what it's all about.
Mortgage from a digital technology advancement standpoint has become a necessity versus a luxury, and it accelerated the work that we had to get done. We’ve looked holistically at our model to find the points of intersection across the home lending process that we could digitize, starting with our online mortgage application. We also implemented things like property inspection waivers, e-signatures for document signing, and remote notarization. These digital options increase accessibility and make the process easier for homebuyers when they can’t physically meet in person for each step.
We’re also looking at things like the ability to automatically validate information that we already have about customers, to provide a seamless and personal experience driven by technology.
I think there's a lot of growth still in this market and a lot of potential. Unemployment is continuing to go down, and GDP growth is continuing to increase. Home price appreciation is increasing in a very robust housing market, and it's consistent with the supply and demand issues that you're seeing. I'm very hopeful that new construction will kick in so that supply and demand will level out.
One of the biggest things, next to the digital advancements made over the last year, is that people will forever look at their homes differently. It was always a place to rest, be with family, and enjoy. Now it’s the office, the gym, the movie theater, and the playground all in one. As people spend more time at home, they may find their current home no longer meets their needs, and that is fueling a pretty robust housing market. Working remotely has also provided people with the flexibility to move where they want to be, without being tied to a work location.
Wells Fargo is the perfect place for people to be able to think about either purchasing a home or refinancing a home.
Start with thinking about what your long- and short-term needs are, and then what's the right product that meets your needs. The 30-year fixed rate mortgage is still near all-time lows, but if you're only going to stay in the home for a couple of years, you may want to consider another product like an adjustable rate mortgage.
Second, considering the market right now, think about whether it’s better to refinance your existing home and take some of the equity out to enhance the home that you're currently in, or if you really want to go out in the market and purchase a new home. It’s all about doing the thing that fits your financial situation and your needs.