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Everything You Should Know Before You Start Net Branch Mortgages

August 16th, 2022 // branchright
Net Branch Mortgages

Are you seeking to start net branch mortgages? Here are four Important factors in this article that you cannot overlook.

Starting net branch mortgages could be the next best option that you have as a mortgage broker. You get to operate your branch under the license of a larger lender without all the liabilities attached. It’s like running a franchise.

However, not having enough information before you venture into net branch mortgages can be fatal. You might carry out the wrong actions, sign the wrong agreements, and even ruin your reputation.

We want you to avoid all these. So, we’ve written four Important things you should know before venturing into a net branch mortgage. Keep reading this article to know more about this.

Requirements For Production

You have to meet some basic requirements for production before a mortgage lender would support you starting a net branch in their name. The larger mortgage company would likely access your tax returns of about two years or more, and make an assessment of your commission runs. This would give them an idea of how you would be able to afford the new location of their net branch mortgages

Most large mortgage lenders will require you to turn in a certain amount in monthly production. Sometimes, this can be as high as $5,000,000. Some companies will also conduct a background check of your compliance history. They will want to know if you’ve had any previous issues concerning federal rules or if you have violated any regulations.

All of this is done because the larger mortgage branch recognizes that they’re taking a big risk by venturing into a net branch mortgage agreement with you, so they’ll want to know if you’re worth it.

State Licensing

You need to consider the state license of the parent lender. Having the license to operate in certain states can greatly affect the success of your net branch mortgages. This would help you extend your client reach and customer base. While some mortgage lenders are licensed to operate in all states in the U.S, some others have restrictions in some states. 

Although, the fact that the corporate office is licensed in all states does not automatically mean that you are eligible for license in all states too, the license of the parent company would give you a hedge.

The Right Parent Company Is Important

The right parent company is important when starting net branch mortgages. There are several factors to consider before you choose a mortgage parent company. 

You need to look at their rates, are they competitive enough to pull clients in? Also, you’ll need to consider the potential relationship that exists between the parent company and the net branch. 

  • Will they let you make decisions for your branch or you’ll have to report whatever goes on to them?
  • Will they provide the necessary workforce needed to start the branch?
  • How much percentage returns do they expect?
  • You need to find out about all these and if the terms of the mortgage lender doesn’t suit you, then opening a net branch in their name would be risky.

Loan Program Provided By The Parent Company

The loan program provided by the parent company is as important as the parent company itself. You need a company with loan programs that fits your future goals. You must look for a parent company that allows open satellite business and growth if you’ll love to expand. 

You should also inquire about their processing and underwriting policies. Are they open to you using their underwriters or you’ll have to use yours? You also need to consider their loan costs and know if they have any reserves for production. 

Having all this information will help you make better decisions with the larger mortgage lender.

Final thoughts

Starting a net branch mortgage comes with its own reward and fulfillment but the importance of the factors discussed above cannot be overemphasized. Fully understanding the terms and conditions of a parent company affects your success rate and the right parent company will help you achieve growth and expansion.