Important questions to ask when looking for a net branch company (part 1)

What are your fees?

How long will setup take?

These are the most common questions I am asked.

Are they the most important?

My answer is NO!

These are important questions but just about every company is close to the same answer.

Most companies are between $350 and $500 per file.
(We are $395 in most states)

Most companies are about 3-7 working days for your branch manager application to be approved.
(We are 2-3 days.)

Each state has different branch licensing requirements - so that step is dependent on which state you are in.

The questions that I think are important to ask are:

1. Is your company HUD approved?
2. If yes - how long have you been approved?
3. Has your company ever been suspended or fined by HUD?
4. Have any wholesale investors cut of or suspended your company in the last 24 months?
5. How many branches do you have active?
6. Does your company have any current buy back requests from investors?
7. How long has your company been in business?
8. How long has your company been involved in setting up branches?
   

In my next post I'll explain why I think these are the most important questions to get answered if you are considering a net branch opportunity.

Another Net Branch Company Shuts It's Door - Global Mortgage Inc.

I just read the news that another national net branch company - Global Mortgage Inc. located in Clearwater Florida - has declared CH-7 bankruptcy.

Global like many others in the net branch segment of the industry was plagued with investor buy backs and operations problems that were caused in part to poor management and also from the pain brought on by churning branches.

At one time they had several hundred branches and operated in over 40 states.

My concern is for the branch managers and loan officers who will lose a lot on money in this melt down.

The current problems in the mortgage industry are a lot like the dot com boom and later crash of the 90's. For a while everyone was running down the road ignoring all of the warning signs - then when they plunged over the cliff everyone was surprised.


Nothing replaces common sense business practices, nothing replaces a little conservatism when it come to financial matters. Most of the net branch companies that have folded exercised little caution when it came to business, they demonstrated little concern for lending rules and regulations.

Most net branch companies closed their doors (imploded) because of the investor buy back requests that hit them like a freight train.

At ANMC we are growing while others are going into BK.

We have no buy back requests from our investors.

We grow at a controlled rate.

We do not have rapid branch turnover - some of our branches have been with us for over 5 years.

We do not bend or ignore lending regulations to make a dollar.

We support on branch network with solid business management.

I always appreciate subscribers and welcome comments and questions.

For more mortgage net branch information visit: NetOriginator.com

Originate in other states - part 2

In the first post on this topic I mentioned that some net branch companies are promoting a system where you can get around the "other" states licensing requirements to originate and still get paid.

I learned about this from a prospective branch manager when I asked if she was considering other companies. I asked what is was about the other company that she liked - she mentioned the ability to originate in all other states without getting the normally required licensing.
Naturally I wanted to know more, so I asked for the URL.

Sure enough there it was right on their front page. Originate in all other states - licensing not required!

When I read the details I was amazed at how they are doing this.

They are paying the originator as a 1099 contract processor on the loan.

I know as an originator that sounds good. The ability to make loans in all states right now with out going through licensing, compliance, continuing education, back ground checks, etc.

But take a minute a think it through - according to RESPA, HUD, and every state that requires licensing and / or has lending laws on the books fees must be reasonable.

Let me ask the question this way; If you were an auditor from HUD or any state agency would you consider it a reasonable fee for a processor to be $3,500 of a $4,000 total fee?

Would you consider that a fair fee for a mortgage originator who does the lions share of the work?

I feel pretty confident that your answers are No to the first question and Yes to the second question.

This falls into the same category as paying loan officers as 1099 contractors or paying an LLC to avoid income taxes. Is it legal? No. Are companies doing it? Yes.

If you are a professional in this business and you are planing on being around for the long haul. Participating in these business practices will only guarantee a quick and painful end to your business.

It will only take one unhappy employee to blow the whistle on these practices and then everyone involved will in it knee deep.

If you have questions about being paid with a 1099 instead of as a W-2 employee see the first post on this topic.

I always appreciate subscribers and welcome comments and questions.

For more mortgage net branch information visit: NetOriginator.com

I want to originate in all states! - Are you sure about that?

I want to originate in every state where you are active.

In my work speaking to prospective branch managers I hear this statement every day.

My answer / question is always the same. Are you sure?

I then ask several important questions.

• Have you researched the licensing requirements for loan officers and branch offices in the states where you are interested in originating?
  
• Are you aware that many states require licensing fees for a branch office to originate in their state?
  
• Are you aware that many states also requires fees for loan officers to originate in their state?
  
• Do you know that many states also require some type of continuing education in order to originate in their state?
• Do you know that some states require a physical location to originate in their state.
• Are you aware that some states like North Carolina require each loan officer to be licensed and that the education and test must be taken in person?
  
• Are you aware of the state specific compliance requirements for the states you where want to originate.
  

Some people thinking about opening a branch office of a national company think that they can originate in every state where the company is active without any additional time, effort, licensing or money. Unfortunately that is not true.

An "out of state" originator interested in developing business in Florida, California, Maryland, North Carolina, South Carolina, Ohio and many other states has to comply with each states licensing, education, disclosure and compliance requirements. Usually it does not work as intended.

Don't misunderstand me, there are situations where you should work in more than one state.

• If you are in a border city like Kansas City, Missouri - you should also be licensed in Kansas.
• If you already have branches setup in more than one state - you should continue when you change companies.
  
• If you have established referral sources in other states - you should consider the investment of time and money to capitalize on those relationships.
  
• If you have an established office, you want to expand into another area and are prepared financially - that is a sound business decision.
  

The main point I am trying to make is that more or bigger is not alway better. Most offices "find" the majority of their business within 25 - 40 miles of their location.

Another related statement I hear is that there are other companies that allow me to originate in all states with out going through the licensing and education requirements.

I will try to address that topic in another post.

I always appreciate subscribers and welcome comments and questions.

For more mortgage net branch information visit: NetOriginator.com

Why Virtual Mortgage Net Branch?

A virtual net branch - web based loan origination system.

Is using a web based loan origination system really better that a PC based system like Byte or Point?

A personal note.. I have been a Point user since the early 90's and have spent hundreds of hours learning how to make it sit up and beg. Custom fields, data extraction, custom reports, making it wide area network usable, fighting to make data secure, etc. I like the application.

With that said I think Point is the best PC based LOS, but it has some major draw backs. Data security is the primary one, along with sharing date between PC's. It's even worse when the PC's are not networked. Just about everyone has faced trying to decide which copy of the data file is the correct one. Just about everyone has felt like shooting their PC at times because of these problems..

Unfortunately data security, compliance, and file sharing are very important when it comes to managing a successful mortgage net branch.

Like many business applications - everything is moving to the web.

Why?

Because there is no software to install or update. Everyone gets to the application via the internet using a login and password for access. Security is easier to manage and it is better.

You no longer have to worry about which copy of the file is correct because there is only one copy. Reporting is centralized even with people at different locations. If your on vacation in the south of France (we can dream) you have access with an internet connection.

There are several application that are a hybrid of PC and web based. All promise results but all seem to have a lot of bugs to work out.

We use Mortgage Dashboard. A 100% web based loan origination system that works.

• No Software to load
• Very tight data security
• Access from any internet connection
• Easy reporting
  

The virtual mortgage net branch is here. Contact me for details.

I always appreciate subscribers and welcome comments and questions.

For more mortgage net branch information visit: NetOriginator.com

1099 vs W-2 employee for a mortgage net branch

This is a very important topic that many net branch companies do not want to address.

Q. Can you work for a mortgage net branch company and be paid all or part of your income as a 1099 contractor?

(There are many companies telling prospective branch managers that this is OK - legal - and that everyone at the branch can be paid by 1099.)


A. WRONG!


Many companies are also paying loan officers and managers as 1099 contractors on FHA and VA (HUD) loans.

This is VERY WRONG!

Let review the 2nd issue - Originating HUD (FHA/VA) loan and being paid by 1099.

Read this summary memo from HUD regarding an audit to determine if independent contractors are being use to originate HUD loans.

Summary Link

It is absolutely clear that this is an illegal practice.

Now let's address the more general practice of paying branches and loan officers as 1099 contractors. Many people think that it's OK if you are not originating HUD loans.

The defining source for this is the Internal Revenue Service.

Many state are silent on this issue, and even if they allow it the federal government does not.

The IRS has a form called SS8 it is a 20 question form to determine if an individual qualifies for 1099 contractor status. No loan officer has ever qualified for 1099 independent status.

Here is another link to the IRS that covers this question in detail.
Topic 762 - Independent Contractor vs. Employee
To determine whether a worker is an independent contractor or an employee under common law, you must examine the relationship between the worker and the business. All evidence of control and independence in this relationship should be considered. The facts that provide this evidence fall into three categories – Behavioral Control, Financial Control, and the Type of Relationship itself.

If the company requires you to use specific forms, requires you to use their vendors - appraisers, title companies, investors, etc., if must put your loans through their company, if you work under their license, you are not an independent contractor you are a W-2 employee.

If you are working as a 1099 loan originator you could be subject to large fines from the IRS.

Does the company I represent pay people as 1099 contractors? Absolutely not!

As you consider a net branch company to work with make sure you are picking a company that is in compliance with the rules and regulations we all have to follow.

Even if you are not conducting your business this way if your company is and they get caught you will be left out in the rain with everyone else in that company.

I always appreciate subscribers and welcome comments and questions.

For more mortgage net branch information visit:
NetOriginator.com

Looking for a net branch company?

Are you looking for a net branch company to work with?

There is good news and bad news.

The good news is that the number of companies that you have to choose from has been cut in half in the last 12 months.

The bad news is that the number of companies that you have to choose from has been cut in half in the last 12 months.

Why is this both good and bad news?

It's good news because there were way to many companies offering services that they could not provide.

The bad news is there are still a number of companies offers branch services that they are not equipped to provide.

Most people assume that the "Sub Prime Catastrophe" is the reason so many mortgage companies offering net branch services closed their doors. I don't think this was the primary reason. I think it was because as loan originations slowed down many companies that were hiding their problems with increasing loan production were left with nowhere to hide.

Their operations problems caught up with them.

I talk to people searching for a company to work with every day. The primary reason managers want to switch companies is that they are frustrated because their current company cannot provide the basic services that they promised to provide.

I will use this blog spot to help people understand more about how to find a good net branch company to work with.

Subscribers and comments are always welcome!