How The Net Branch Really Makes Its Money
Rob Lawrence, Chief Mortgage Warrior Of
Battlecall.com
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.
Got an opinion? We want to hear from you. Post your thoughts or comments here in our Mortgage Warrior Forum. Come join the conversation and say hello...onward mortgage warrior!
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