Which is Better - Net Branch Mortgage Broker or Net Branch Mortgage Lender?

Broker vs. Lender - If you are considering joining a net branch company one of the biggest decisions you face is the lender vs. broker decision.

In the past the ability to be both a broker and a lender was a valid option. Today although most companies still promote the available option to be broker or lender - in today's reality that is not an option that is really available to you.

Why?

Because of a little rule that HUD has in place for FHA loans.

The HUD rule says your company has to either broker 100% or lend 100% on FHA loans. You company cannot "cherry pick" by allowing you to close some FHA loans as a lender and allow you to broker the loans they do not like.

Since the majority of loans closing are now FHA - the HUD rule is pretty much the rule of the day.

So with this in mind - which is better for a net branch opportunity - Broker or lender?

Here are the pluses and minuses.

Lender: Pluses

• Close in your company name


• No disclosure of YSP


• Status of telling client you area lender


• Ability to work with in-house underwriters

Lender: Minuses

• Greater risk to company


• Must usually go through company underwriter not end investors


• Experienced FHA underwriters are very hard to find and keep


• Company warehouse limits can restrict or stop funding at end of month


• Limited investor options

Broker: Pluses

• Can use many different investors


• Work directly with investor


• direct wholesale pricing

Broker: Minuses

• Must disclose YSP


• Some states restrict mortgage broker fees


• Junk fees from investors can be a little higher


• Wholesale investors are exiting the business

As you can see there is not a clear cut winner in this comparison.

You have to do your homework. You have to ask a lot of questions before you make a decision.

As a mortgage net branch manager your decision should be a careful one.

If you are talking to a company that does not want to take the time to discuss this important issue it should be an indicator that you have not found the right company to work with.

I try to present information about net branch opportunities in an impartial way. The main objective of this section of the site is to give facts about the net branch industry in general.

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Net Branch - Mortgage Broker -Mortgage Lender - FHA Net Branch

Growing your net branch business

Growing your net branch business.

Should you hire more loan officers or is there a better way?

After becoming branch managers many successful loan officers try to duplicate themselves by hiring more loan officers. It is a logical step. But is it the right step?

The internal conversation usually goes something like this: “If I can hire 3 loan officers and make an override on their loan production, I can use that income to pay overhead and I can keep more of the origination income from my personal production.”

Sometimes this does work out as planned but many times branch managers find that managing loan officers takes up so much of their time that their personal production suffers. Helping with someone else’s clients, troubleshooting operations problems, trying to help with underwriting and other investor loan problems all take away from the managers personal productivity.

Then there is the successful loan officer that the branch manager mentored through the learning process only to have the producing originator leave to open their own branch office. Instead of being able to reap the rewards for mentoring a loan officer the branch manager now has created another competitor.

Is there an alternative?

I think we have lot to learn from successful Real Estate Agents. When an agent wants to increase their business many times they hire an assistant. The assistant helps with the non income producing tasks that come with more business. There is more follow up, more appointment setting, more calls and emails to make sure business is moving forward. By delegating these tasks to an assistant the agent has more time for core activities that generate income.

There are a number of benefits to hiring an assistant instead of hiring more loan officers.

An assistant’s focus is on you and your business not on growing their business.

An assistant’s income is fixed. It is either hourly or weekly you are not splitting fees.

The cost to benefit ratio is a good one. If an assistant can help you increase your productivity by 40% how much is that to you in net income?

An assistants work can have a synergistic effect on your production. synergy = “The interaction of two or more agents or forces so that their combined effect is greater than the sum of their individual effects.”

In plain English that means that more than one person focused on that same goals can produce higher results.

Hiring an assistant instead of hiring more loan officers could be a better answer.

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Mortgage Net Branch Opportunity

How does the "meltdown" affect net branching?

Does the "meltdown" affect net branching?

As a nation and as an industry we are in uncharted waters. I doubt anyone can accurately predict the outcome. What we can do is make some estimates on how the mortgage meltdown will change our industry in the short term - The next 18 - 36 months. Purchase - Purchase - Purchase - FHA - FHA - FHA - Reverse - Reverse - Reverse.

You need to be aligned with a company that is is in a good position to originate FHA loans and Reverse mortgages in your market and you can for the most part eliminate refinance out of your business model.

Refinance will not disappear completely but I believe you will see the numbers continue to drop.

With home values dropping home equity is going with it. Even the best markets have lost 20% - 25% equity. This greatly reduces the refinance market. With the problems Fannie and Freddie are facing FHA is going to be the primary source of mortgage funds in the short term.

If you are not with a company that is in good standing with FHA you should consider making a move.

If you find this information helpful please let me know. I always welcome suggestions, comments and new subscribers.

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