Robert Lawrence asked:
In my last article, I covered the two main ways to start your own mortgage company. One way, was to go it completely alone…apply for your own broker’s license, set-up all the relationships with the various lenders, handle all the back office stuff like accounting, compliance, etc. All of this, giving you your independence, but being extremely time consuming.
An easier and more productive way for the loan officer wanting to go on their own, is to join an existing company and operate their own individual “net branchâ€. It’s where you are working under a head-office, but operating as an individual with all the perks and privileges that go along with independence, but without a lot of the chores and headaches associated with a start-up company. A net branch is simply a way of doing business.
Net branching is a term that is very loosely thrown around the industry, and not every partnership opportunity a company offers is a true “net branchâ€. Please be careful.
Mortgage companies net branch because it is a way for them to expand their sales force with very little cost or financial risk. Because you are working solely on commission, they don’t have to pay a salary. And, if you don’t produce, you won’t last. Only the strongest will survive. It’s as simple as that!
Companies also already have the structure, compliance, auditing and lender relationships set in place. To add a new salesperson or branch, takes little time and can mean a new on-going revenue source for the firm.
Since the start of the low interest rate boom, companies have recognized that net branching is a smart and viable solution to expansion, especially when adding new states to their lending roster.
Here are the top reasons why loan officers decide to branch-out on their own:
1. They want more commission. They are sick of doing all the work, and getting a measly pay split. They want financial independence.
2. They want more control over their career. They are sick of being micro-managed and controlled by the boss.
3. They want their time back. They have other life obligations and want to spend more time with their family doing the things they enjoy. They are sick of the long hours and late nights.
4. They are emotionally drained and tired of all the office politics. They want to “choose†the people they deal and work with.
5. They are sick of being a robot. They want to fully use all their skills and knowledge and remain challenged in their career. In essence, they want creative and personal freedom.
Here are the advantages of joining a net branch:
1. Better pricing on rates, due to the volume of loans the company as a whole originates. Remember, although you are a single net branch, you have the buying power of thousands of other net branches that are within the company.
2. Greater depth of loan programs. With access to more lenders, you can offer more programs to the consumer and cover virtually any loan scenario.
3. Higher commission payment, usually in the 70% to 80% range, sometimes 90% to almost 100%.
4. Ability to originate loans in multiple states, even all 50! This means more loans for you! Don’t throw those out-of-state leads away!
5. No accounting or compliance headaches to deal with. The head office has these structures already in place. This leaves you more time for selling.
6. More attention from the wholesale account executive. Account reps know that if they are dealing with a large firm, they will get more business. They don’t want to waste their time dealing with the small fries.
7. Ready marketing materials. You do not have to start from scratch and create your own marketing collateral and brochures.
8. Licensing and start-up requirements from the state are significantly less, because there is an operating mortgage firm already underway.
9. You have the resources of the head office, as well as other local net branches. This forms a significant support network, which should not be underestimated.
10. Freedom to make your own schedule and call your own shots. You are in the driver’s seat and if you want to earn more income, simply work harder. No one is holding you back from your career.
11. You can multiply your efforts by hiring loan officers underneath you, and get a cut of THEIR commission as well.
Disadvantages of joining a net branch are:
1. You still must follow the company’s internal rules. You are technically an “employee†of theirs, and at their mercy.
2. Are they really telling you the whole story upfront? Will you be hit with any company surprises down the road?
3. Once you join a net branch you can’t easily jump and join another one.
4. You can’t choose the mortgage company name, you have to use their name. Also their logo, business cards, marketing materials, etc.
5. You may feel isolated by not having an office to go to, as most net branches are operated out of the loan officer’s home. And, if you do choose to rent an office, that’s an expense you must pay for.
6. People may not always be accessible or return phone calls when you have a question.
7. Some net branches have minimum sales requirements, and will fire you if you do not meet their sales goals.
8. Expect to do a lot of the loan processing yourself. After all, you are working solo now. Or, if you don’t want to do processing, expect to hire someone to do the work. Again, another expense.
9. Most net branches don’t offer health benefits. Some say they do, but when you read the fine print, they have 1 or 2 year timeframes you must be with the firm first. Or, they don’t cover all states. Mostly, it’s just the run around. So, make sure you get on your spouse’s health plan before you make the jump. Or shop around for personal health coverage.
Before deciding to join a net branch, here are some personal questions to consider:
1. Are you financially ready? Can you live off your current savings while your new branch is getting set-up? How much are your personal living expenses? What future expenses are likely to come-up?
2. Are there any business start-up costs? What are the fees upfront that must be paid before you can begin? Things like individual state licensing, setting-up a reserve account, office expenses etc. are costs that are borne by the individual loan office NOT the net branch.
3. Do you have a support network in place? Will your family support your efforts in your new business? Who will you turn to when things get rough?
4. Who is your competition? If you are leaving a local firm, mostly likely your former employer will be your fiercest competitor.
5. Did you sign a non-compete clause with your current mortgage firm? Check you’re your attorney. Although, not entirely legal in all states, companies will use this as a way to brow-beat you into submission. You can’t be stopped from earning a living. Don’t let them stop you from your dream.
Remember, going it alone comes with a price; and one which should be carefully considered. There are advantages and disadvantages of starting your own firm. In the end, a net branch is simply a way of doing business. It’s a conduit by which you can originate and close loans. Net branching is a great way to have the freedom and independence of your own mortgage firm, but with significantly less risk.
So, go ahead and give yourself an instant promotion this year. Consider net branching, but look carefully before you leap.