KeyBank exec: Expansion into residential lending continues to accelerate

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Despite its position as a major regional bank, KeyBank had been relatively underrepresented in the residential mortgage lending business, at least until its acquisition of First Niagara Bank three years ago.

The $140 billion-asset KeyBank had mainly offered mortgages through third parties such as PHH. The cross-selling opportunity stemming from spreading First Niagara's mortgage business across KeyBank’s 15-state footprint was a key reason for the acquisition and it has provided the company’s growing roster of loan officers with new markets to mine for originations, an initiative that soon will be buttressed with a proprietary version of sophisticated front-end software tools.

Last fall, 20-year veteran Victor Alexander took the helm of residential mortgage lending. Previously the bank's corporate treasurer and head of corporate strategy, he already had strong relationships with bank leaders in other areas, bolstering referrals and the bank’s ability to cross-sell products.

"I can help bring people together because I have the benefit of two decades here and people know me, and I’ve been able to work with our retail, private and commercial banking partners to talk about our capabilities in mortgage, so we can get all professionals in front of clients at the right time," Alexander said. As a result, he said, referrals from each of the business areas are "up meaningfully" this year.

The bank has ramped up hiring of mortgage talent at the manager and loan officer level. It now has 180 loan officers that originate mortgages in its 1,100-branch footprint spread across the Northeast, mid-Atlantic and Midwest, and in fast-growing cities in the West, including Seattle, Portland, Boise and Salt Lake City. The First Niagara acquisition brought operations centers in Buffalo, N.Y., and New Haven, Conn., and KeyBank has built a new one in Salt Lake City to be closer to the Western markets.

This year bank has pursued a multichannel marketing approach — from the digital screens behind tellers, to emails and online advertising, to direct mail — to alert customers that it can service their mortgage needs.

"When I first got this job, I walked around our biggest branches across the franchise where we have hundreds of millions of dollars in deposits and most of our customers, and it was like the mortgage business was a secret; clients didn't know we were in that business," Alexander said.

That has changed significantly this year. The bank's volume of funded mortgage loans increased 60% during the first half of 2019, and that number is expected to increase to 75% by year-end, Alexander said.

He added that growth is higher across the board and a bit more so in the Western markets.

"We're trying to activate the power of our franchise," Alexander said. "We have three million clients, and thousands of retail banking colleagues talking to those clients every day, helping to improve their financial wellness. So we're making sure we connect all those dots."

Alexander noted that the bank is generally seeing more growth in the Western-state markets, where average home prices tend to be higher. The bank provides loan officers with equal support, he said, whether the same type of house costs $600,000 in Seattle or $250,000 in Buffalo.

Like other banks, KeyBank is designing products that its loan officers can market to certain borrowers. Its Key Community fixed-income product, for example, is aimed at first-time homebuyers, offering them 100% loan-to-value and no requirement for private mortgage insurance.

Alexander said one of the biggest initiatives to support loan officers comes from its acquisition of Laurel Road, closing early in the second quarter. That firm's primary business is refinancing student loans, for which it built a sophisticated digital platform and customer interface. It also dabbled in mortgage lending, building a platform similar to those from big mortgage technology vendors such as Blend and Roostify that automates and facilitates much of the loan application process for loan officers and their customers.

"Laurel had some very complimentary capabilities that will enable us to accelerate our growth further — it was a nice side benefit from the acquisition," Alexander said.

KeyBank's technology team, now including Laurel Road's experts, will focus on connecting loan officers, processors and underwriters to the system, which will sit on top of and interact with the bank's Black Knight Empower loan origination system. Alexander anticipates the system being rolled out to customers over the next year.

Many of KeyBank's competitors already provide their mortgage bankers with such a tool, giving them a head start in adapting to the rapidly evolving mortgage lending industry. However, waiting for a homegrown version could provide advantages, Alexander said. He noted the difficulty in predicting what the mortgage environment and the bank's needs will be in three years, so having its own system and owning the software code should provide KeyBank with the flexibility to make enhancements or other changes in a timely manner.

"It gives us a degree of strategic flexibility that we like," he said.

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Marketing Digital mortgages LOS First time home buyers Mortgage technology Keybank First Niagara