Flagstar promotes Lee Smith to CFO

Flagstar Financial promoted mortgage industry veteran Lee Smith to chief financial officer, the latest strategic move the bank has implemented in its 2024 upheaval after balance sheet issues first came to light.

Smith first joined the Flagstar legacy bank in 2013 as chief operating officer and has served on its executive management team for over a decade. He moves into the CFO role after most recently holding the title of president of mortgage, a role he stepped into in late 2020. An established mortgage lending institution previously based in Troy, Michigan, Flagstar was acquired by New York Community Bancorp in 2022. 

Smith's appointment becomes effective on Dec. 27, when he takes over from Craig Gifford, who will remain at Flagstar through the first quarter of 2025 during a transition period. 

"As all of our stakeholders know, we have been working relentlessly to elevate Flagstar to new heights," Chairman, President and CEO Joseph Otting said in a press release. 

"He is a proven leader with a strong track record, has the requisite experience and expertise, and possesses deep knowledge of the company. The board of directors and I have full faith and confidence in Lee to continue to help guide the company in this financial leadership position," Otting said. 

Before joining the banking industry, Smith was a partner at private investment firm MatlinPatterson Global Advisers. His professional background comprises work across mortgage, accounting, finance, private equity and operations, and includes experience managing large-scale transactions, regulatory compliance and mergers and acquisitions.

The latest leadership development comes at the end of a turbulent year for the bank, which saw both its stock value and reputation plummet following reports of significant 2023 losses and a balance sheet heavy on high-risk multifamily loans in January. 

The subsequent weeks and months saw shares of the publicly traded financial institution, which then still went by the name of New York Community, fall by almost 74%, as well as the ouster of its former CEO. A financial rescue later came from Liberty Strategic Capital, the firm led by former Trump administration Treasury Secretary Steven Mnuchin, and Otting, who took over top leadership positions. 

Further NYCB leadership exits ensued, and business decisions made over the spring and summer saw the bank reduce its investment in home lending. 

In May, it first unloaded billions in mortgage warehouse loans in a deal with JPMorgan Chase. The sale of mortgage servicing and subservicing businesses, which had been key revenue drivers at Flagstar, followed. New York Community also relinquished mortgage servicing rights and its third-party originations platform in the sale to Mr. Cooper as it attempted to shore up its capital position. The loss of those divisions led to more than 700 layoffs at the bank.

Both pre- and post-acquisition, Flagstar has also been the sponsor of a mortgage technology accelerator for emerging fintechs. The program is currently the only accelerator targeted exclusively to mortgage and housing technology developers. 

In late October, New York Community announced a name change in an effort to further redefine itself after its year-long struggle. The Hicksville, New York-based enterprise had retained Flagstar branding on all branches post-acquisition, citing its higher familiarity among consumers. In October, it went one step further, renaming the corporation to Flagstar Financial, and began trading under a new stock ticker symbol.

Alongside Smith's ascension to CFO, Flagstar also announced the appointment of former Treasury Department General Counsel Brian Callanan to its board of directors late last week. An attorney with background in financial regulation, regulatory compliance and technology, Callanan is currently senior managing director and general counsel at Liberty Strategic Capital, heading all legal activities. The selection of Callanan comes under the terms of Liberty's investment into Flagstar this year, which designated two board seats would be granted to the firm. 

Flagstar investors greeted the news with an initial negative reaction to begin the trading week, as the bank's stock value fell 8% to $10.16 in the first hour after opening bell. The shares traded around $10.84 at midday.