Change Management

This piece originally appeared in the August 2023 edition of MortgagePoint magazine.

In September 2020, the Five Star Institute (parent company of MortgagePoint) awarded the annual Five Star Lifetime Achievement Award to Ann Thorn, then serving as EVP and Chief of Operations & Servicing for Caliber Home Loans, Inc. Normally, this award would have been handed to Thorn onstage at the Hyatt Regency Dallas, as part of the annual Five Star Conference & Expo. She would have taken the stage beneath a 300-foot bank of screens projecting a profile video featuring Thorn and testimonials about her career from various respected colleagues and mentors. All of it would have taken place in front of a crowd of applauding industry colleagues.

All of that would have happened in any other September. But I probably don’t have to remind you that during September 2020, eight or so months into the global COVID-19 pandemic, very little was like “any other September.” Instead, Thorn accepted her award on a number of much smaller screens, as attendees tuned in to watch her deliver her thank-you speech as part of the first-ever Virtual Five Star Conference, amid a turbulent global situation in which so many aspects of our daily lives had become encompassed by the boundaries of the laptop screen, the phone screen, the tablet screen.

It was a snapshot of the unprecedented challenges facing a mortgage industry attempting to navigate a world where the brakes had been slammed to the floorboards only half a year earlier: where millions were facing the loss of income or employment, where the entire mortgage ecosystem was, by necessity, forced to collaborate and innovate in ways it never had before, with millions of homeowners suddenly learning what the word “forbearance” meant. With one wave of COVID-19 spiking after another, even as the industry and government worked to help keep people in their homes, no one knew what the next year would look like, much less beyond.

It’s perhaps appropriate, then, that one year after the industry took a moment to appreciate and reflect on Ann Thorn’s career during that broadcast, the next chapter of it began.

On September 7, 2021, Wells Fargo announced that Ann Thorn had been named head of the company’s Home Lending Servicing operations. As described in the press release, in this role, Thorn was tasked with overseeing “the nation’s largest mortgage servicing portfolio including loans with total unpaid principal balances of nearly $1.1 trillion as of June 30, 2021.”

Needless to say, it was no small task, but it was one that Thorn was excited to tackle. As the months passed and the nation began to emerge from COVID-19’s shadow and figure out just what “normal” looked like, Thorn and her team at Wells Fargo were, like all of the nation’s servicers, tasked with helping homeowners as they reached the end of their forbearance period and worked to get back on track with their payments. According to a May 2022 report from the St. Louis Fed, about 16% of individuals with mortgages used forbearance at some point after April 2020.

While the Fed’s data notes that most of those homeowners only made use of forbearance for three months or less, that still leaves a lot of people in need of their servicer’s help when it comes to figuring out what happens next.

Even with a global health crisis in the rearview mirror, the mortgage landscape is rarely stagnant and never boring. The refi boom of the COVID-19 years emerged to collide with the realities of inflation, with the Federal Reserve beginning a series of rate hikes designed to slow the inflationary pressures, but which also put a damper on the originations sector. Potential homebuyers started considering their options as mortgage rates crept higher and housing inventory shortages, already a challenge before the COVID-19 years, became exacerbated even further as many homeowners felt reluctant to sell or move since that would mean leaving their old, much lower, rates behind.

In January 2023, Thorn’s role at Wells Fargo faced a new development: the bank announced it would be stepping back from the multitrillion-dollar U.S. mortgage market amid regulatory pressure and the impact of higher interest rates. As part of this shift, Wells Fargo announced it would be shuttering its correspondent business and “significantly” shrinking its mortgage servicing portfolio through asset sales.

“We are acutely aware of Wells Fargo’s history since 2016 and the work we need to do to restore public confidence,” said Kleber R. Santos, Senior EVP and CEO of Consumer Lending for Wells Fargo. “As part of that review, we determined that our home lending business was too large, both in terms of overall size and its scope.”

Now nearly two years into her role at Wells Fargo, Ann Thorn took some time to speak with MortgagePoint about her three-decade career in mortgage, how she and her team are working to achieve the bank’s new vision for its servicing portfolio, and why it’s critical to have the right people and processes in place, as, when it comes to mortgage servicing, “there is always a next crisis.”

The View From Two (or 30) Years In
When asked if her career has shaped out the way she once envisioned it, Thorn laughs and responds, “I don’t think you wake up one day and say, ‘I’m going to be a mortgage servicer,’ you know?”

Thorn’s pre-mortgage career began in outside sales, selling copiers out of the back of her car in South Chicago. From there, she moved on to selling industrial chemicals, as she puts it, “pounding on the back doors of huge plants.” Eventually, she decided she wanted something different. She eventually found work at Fleet Mortgage in Milwaukee, Wisconsin, making, as she recollects, around $11,000 a year.

“It just grew from there,” says Thorn, “and I never got out of it.” Fleet Mortgage was acquired by Washington Mutual in 2001, and then eventually by JPMorgan Chase, but Thorn remained a constant at the organization through multiple changes of signs and stationery, rising to the rank of First VP of Default Services and eventually racking up more than 20 years with the company, finally leaving in June 2011, when she moved over to roles at Bank of America.

Rarely a short-timer, she stayed with BofA for more than a decade before accepting a position with Caliber Home Loans, where she served as Chief Loan Administration Officer.

That gig lasted about two and a half years—until Wells Fargo came knocking on her door. One of the things Thorn most enjoyed about her career path through some of the biggest financial entities in the world was the opportunity to move around within the organizations, to learn the ropes for originations, servicing, and operations, both within the mortgage sector and even the automotive side of things.

“I like change,” Thorn told MortgagePoint. “So, here I am, 30-some-odd years later and still in servicing because it is ever-changing. Every day is a challenge, and I learn something new every single day.”

That was no doubt a useful philosophy to adhere to for someone stepping into managing Wells Fargo’s massive portfolio amid and after the challenges of COVID-19, to say nothing of now being issued the task of shrinking and rethinking that very same portfolio to hew to the bank’s new direction.

Even with Wells Fargo scaling back its mortgage commitment, there were still plenty of challenges to be managed as homeowners continued to exit forbearance and deal with an economy that industry soothsayers have been predicting would tip into a recession for months now.

When asked about how she prioritized her approach when she first joined Wells, Thorn said, “Some of the biggest items we had to tackle [involved] ensuring I had a servicing organization structured to handle the overarching issues. I needed to ensure we had the right talent in the right positions, and I spent the better part of the first 18 months ensuring that we had that structure and getting the right talent in place. It was no secret the regulatory items we were tackling. We needed to get ourselves situated in a very structured manner so we could tackle some of the overarching issues that were upon us.”

Two years into that role, Thorn feels positive about the results, saying that she believes she has indeed put “the right people in place.”

“We’ve set up that structure, we’ve set up the routines, we’ve set up all our partnerships internally. Our next big priorities are part of

the announcements that we put out at the beginning of the year, [working on] simplifying and reducing our overall servicing portfolio,”

Thorn continued. “Now we’re executing that plan so that, within our servicing environment, we can get down to a more simplified portfolio that becomes easier to manage, easier to service, and easier to serve our customers while also being flexible and nimble enough to make changes the investors, states, and so on require. Right now, we have a portfolio that [doesn’t align with our] overall strategy, and so getting that narrowed and focused down is part two of where we need to go.”

If she makes it sound simple, it’s not. After all, Wells Fargo is the nation’s second-largest mortgage servicer and one of the largest originators, having funded around $94 billion in mortgages through Q3 2023 (per Inside Mortgage Finance). Servicing is complex, expensive, extensively regulated work even on the best days. And if managing that nearly trillion-dollar portfolio was challenging, it would also be challenging to scale all of those moving parts back down to the level the bank now had targeted.

“Wells Fargo is a very, very large organization—we’re the largest servicer in the country—so that adds complexity to what we have to do and what we have to deal with when changes are hitting us,” Thorn said. “As with most servicing, there are a lot of complications with our overall technology that don’t make it easy to shift. That was probably one of the biggest reasons why I had to make sure that we had the right strategy as we work toward that more simplified portfolio, just because of the size and scale of Wells Fargo.”

As Thorn explained, “The more complex our portfolio, the more investors we have and the more we must change.” The bank had over a million customers in forbearance at one point, and Thorn and her team needed to navigate a complex regulatory framework for helping those homeowners find a path forward.

“It’s about being able to ensure that every one of our customer service agents, everyone within loss mitigation, knows every single rule that is out there,” Thorn noted. “That’s where the complexity comes in when you have such a large and diverse portfolio.”

Next Steps
At the end of July 2023, the Federal Reserve hiked rates once again, settling (as of this writing) at a rate of 5.50%—a 22-year high.

This often complicates mortgage servicers’ jobs when it comes to finding workable solutions for struggling homeowners, as gone are the days when they could refi to a lower rate.

“There are going to be situations where our customers are sitting at 2%, 3%, and 4% interest rates, but they’re still going to need a loan modification. So, then it becomes a question of what do we do and how are we going to work these programs—and are there programs? HUD has started to come out with some new programs, and that has provided an opportunity for the industry to come together because [some of these programs are] very difficult to implement.”

Thorn says she’s grateful for the industry dialog happening between HUD and other agencies and industry groups such as the National Mortgage Servicing Association or the Mortgage Bankers Association. But as she pointed out, when it comes to mortgage servicing, “there’s always another crisis”—and Thorn is already thinking ahead to those possibilities.

“How are we going to address it if we get into a time where we have rising delinquencies and rising foreclosures again? Because we’re not set up for that given the current interest rate environment.”

Thorn told MortgagePoint she’s trying to take a proactive approach.

“There are some proposals out there that we’re trying to get our arms around, but that’s going to be a big driver for us over the next couple of years in the servicing space,” she said.

One area of focus is in automating what can be automated, working to remove inefficiencies or “stare-and-compare” tasks that can streamline things and make life easier for both the borrower and the servicer.

“Manually tracking and monitoring customer payments for three to five years on these programs is just not realistic,” Thorn said.

“Working with our servicing system providers and those agencies to avoid additional manual processing is going to become critical.”

Of course, one complaint we hear often from the people we interview is that the servicing sector tends to often lag the originations half of the industry when it comes to both technological innovation and the budgetary support to implement it.

“There’s a lot of technology and effort put into the origination space, and that’s neither unusual nor strange,” Thorn said, noting that when it comes to servicing tech, “there’s no silver bullet out there unless you’re going to just stick to one type of loan and that’s it.”

Rather than aligning multiple different applications for her team’s purposes, Thorn said, “We are focused on getting back to using our core servicing system and getting that upgraded to a place where it is doing its job without needing all these applications around it. We are working to simplify it to where I don’t have a huge diversity of different products and investors across the portfolio. That automatically helps you simplify what you need from a technological standpoint.”

For Thorn, another key to navigating this maze lies in simply listening to the borrowers and ensuring customers are being given what they truly need, as well as being interacted with in the manner they prefer.

Thorn explained, “We may divert some of our technology budgets to digital, online, or IVR (interactive voice response) because that’s how customers want to interact with us.

Customers don’t always want to pick up the phone and talk to a customer service rep. They want automation, they want to see that activity, so that has been driving discussions about how we can provide that service and technology.”

‘Communication and Authenticity’
When looking back on her three decades in mortgage, Ann Thorn ticks off a few important lessons. Maintain a sense of humor. Be patient and don’t sweat the small stuff. But the more we dig into this topic, the more we come back to a few key tenets: building strong teams and communicating authentically.

Teambuilding has been at the heart of much of her most-important work since joining Wells Fargo two years ago, and Thorn reiterates it as one of the most useful skills she has acquired throughout her career.

“Building great teams is key to success and ensuring succession planning,” she said.

When it comes to communicating with that team, Thorn recommends that you “keep it simple and communicate authentically. As a leader, I want to ensure that I’ve got trust in my team, they have trust in me, and we all have trust in the bigger organization.

That, to me, is about good communication and authenticity. A lot of it truly comes down to talent and people.”

This is also where we circle back around to Thorn’s observation that in mortgage servicing, there’s always a next crisis. And when that next crisis arrives, in whatever form it does, Thorn is adamant that it will be the strength of your team, and their ability to communicate and collaborate, that will carry you through to the other side.

“One of the most critical things to me is how you lead through crisis and how you’re going to act in those crisis moments,” Thorn explains. “When there’s a fire drill or a COVID pandemic, how do you lead your team through that, whether that crisis lasts a day, three years, or anywhere in between? Because in mortgage servicing, there is always a next crisis.”

“During those moments, who do you look to?” she continues. “You want to look to your leaders, the same as I did with my leaders, and know, are they supporting me? Are they helping me solve my problems? Are they helping me strategize and put a plan together? Or am I out on an island, all by myself? That makes a difference.”