How The Mortgage Net Branch Really Makes It Money
Sunday, March 30th, 2008How The Mortgage Net Branch Really Makes It Money
By: Rob Lawrence
In the past few issues, we?ve been discussing net branches, and the advantages and disadvantages of this type of loan origination. I covered the reasons why loan officers decide to go out on their own, and what makes one net branch better than another. There are a myriad of choices and literally thousands to choose from! Ultimately, the most important factor in any decision is deciding which company will best serve YOUR needs so you can achieve the level of success you deserve. If the company only talks about themselves, then you know who comes first! They do!!!!
In evaluating net branches, I thought it best to let you Sink or Swimmers in on a little secret. It?s something that nobody talks about and is one of the best kept secrets in the industry. Certainly the net branches won?t tell you, but today I am going to spill the beans. I am going to tell you exactly how the net branches make their money, so you can better understand how you will make YOURS.
Net branches make money two ways:
1. They make money from you, the loan officer.
OR
2. They make money from the bank.
Most of the time, it is a combination of the two. Here?s how it works.
Net branches may make money from you by:
* Charging an in-house processing fee to do your loans.
* Charging an upfront joining fee or flat monthly fee to do business with them and be a part of their company.
* Charging a flat rate per-file fee on each and every loan file that passes through them (different than the processing fee, this is usually listed as a flat rate and they will forgo any commission and give you 100% commission of the YSP, yield spread premium, from the lender).
* Charging you for the customer?s credit reports, appraisals, etc. and making you eat the cost if the customer doesn?t pay for these things upfront.
* Making you pay for your own training (which they provide) or making you attend pep-rallies or buy other ?motivational? material. (I am not going to say who this is, but I am sure you?ve heard of them!)
* Tacking on other little administrative ?expenses? here and there under mysterious names, (if you?ve ever tried to decipher a phone bill and figure out all the small charges you know what I mean, so watch out!).
Net branches make money from the bank by:
* Taking a percentage of the final commission split. So if you are getting 80% commission, they get 20% of the total take.
* Giving you ?in-house? rate sheets that the lender sends them, and they in-turn mark-up and redistribute to you. They take a ?mini? spread on each and every loan you do. In effect you are getting retail rates and not wholesale rates from the lender. The net branch is taking a cut off the top of your YSP commission which YOU WILL NEVER EVEN SEE, because it is on the back-end from the lender. If they insist you only take their rate-sheets from the HQ, watch out!
* ?Kick-backs? and in-kind deals for referring business to their preferred providers, whether it be lenders, appraisers, title companies, etc. They may have a business relationship set-up with them. If it means lower costs, then it?s great for you. If the costs are higher than what?s normal, who do you figure is pocketing the difference?
* Basis-points agreements in place with lenders, where on a certain loan volume, the commissions and incentives to them increase (these are usually never passed onto the loan officer).
Now, of course, the net branch is entitle to make money. They deserve to. After all, they are helping you get started in your own mortgage business. Firms may do some or all of the above. It will be a combination of money from you and money from the lender. Ultimately, it?s up to you to ask questions and determine how both you and they will be paid.
What you want to look for, is a net branch that puts its loan officers first and goes the extra mile to help you succeed. Remember, if you are making the kind of money you deserve and achieving your goals, the net branch will also achieve theirs.
In next weeks issue, I am going to name some of the best names in mortgage net branching and who you should consider looking at before making a final decision.
Article Source:
http://www.articlecity.com/articles/business_and_finance/article_9350.shtml