Flagstar promotes Lee Smith to head its mortgage business

Flagstar Bank in Troy, Mich., has named Lee Smith as its new president of mortgage, stepping into the role vacated in July by Kristy Fercho, who now heads up Wells Fargo Home Lending.

Smith joined Flagstar in 2013 as executive vice president and chief operating officer. He directed a number of business units, including mortgage servicing, as well as strategy, balance sheet and cost optimization and mergers and acquisitions.

Now as president of mortgage, Smith is responsible for the direction and oversight of all aspects of the business, such as mortgage sales, originations, servicing, fulfillment and the overall strategic growth of the mortgage and servicing business units.

Flagstar also announced that it is eliminating the COO position with Smith's promotion.

"Lee has worked side by side with me since day one of my job as CEO," Alessandro DiNello, president and CEO of Flagstar, said in a press release. "No one has been more instrumental than Lee in building the diversified business model that has brought us so much success. We're now at an inflection point as a company where we can direct his skills to running one of our major businesses — a business he helped build and knows top to bottom."

Flagstar originates mortgages in the retail, wholesale and correspondent channels. It also provides warehouse lines to mortgage bankers.

Under Fercho, who joined the company in August 2017, Flagstar originated $12 billion of mortgages in the second quarter. That business had revenue of $295 million on the strength of a 139-basis-point increase in its gain-on-sale margin to 219 basis points.

But net return on mortgage servicing rights decreased by $14 million to an $8 million net loss for the second quarter, primarily driven by higher prepayments.