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