The Texas Department of Savings and Mortgage Lending issued a statement about the departments new rules for considering information in a loan officers credit report as part of the application process.

The department could deny a loan officer license if you have any of the following on your credit report.

• Bankruptcies filed within the last 10 years;
• Current outstanding judgments (except judgments solely as a result of medical expenses);
• Current outstanding tax liens or other government liens;
• History of and current collection accounts;
• Foreclosures within the past three years;
• Three or more accounts more than 90 days past due;
• Multiple Social Security Numbers attached to the individual’s name;
• Consumer provided comments;
• No credit history for the individual;
• Credit items the individual is appealing, if noted in the report; and
• Outstanding child support.

According to the memo credit scores will not be part of the decision but the department “may look at systemic, long-term financial irresponsibility as a reason to further investigate the information received before a final licensing decision is made. No single item listed above will serve as grounds for ineligibility, but several will cause further investigation and each decision will be made on a case by case basis.”

To read the memo CLICK HERE and read “Credit Check Processing through the NMLS – February 2010″

I always welcome comments, questions, and subscribers!

If you would  like to know more about our net branch partner program visit our Frequently Asked Questions page.

Texas Mortgage Net Branch Opportunity

If you are consider joining a mortgage company that offers a net branch opportunity you should be considering these changes before you decide on which company to join.

Big Net Worth Change for Net Branch Mortgage Companies

One of the most important is the new net worth requirements set by HUD that will  begin this year. The old rule required a company to have an audited net worth of $250,000. The new rule initially bumps the net worth requirements to $1,000,000.  Estimates are that this change will eliminate close to 25% of the mortgage companies that hold a lenders license with HUD because the cannot meet the new requirement.

The big question is which companies will be gone. You should ask questions about the financial soundness of any company you are considering joining. What is their net worth? Can they meet the new HUD requirements?

To make this even tougher, the $1,000,000 net worth threshold is only the first step. With in 3 years the minimum  net worth required to be a HUD approved lender will be $2,500,000.   That is a 1000% increase over current requirements.

Estimates are that close to 70% of current HUD approved lenders will not be able to meet the final net worth requirement.

Changing mortgage companies is a big move for any branch office. It cost time and money to make a move.  Do your homework on a company before you decide.

I always welcome comments and subscribers!

If you would  like to know more about our net branch partner program visit our Frequently Asked Questions page.
http://www.netoriginator.com/NetBranchFaq.htm

Mortgage Net Branch Opportunity

Setting up a net branch means that you are applying to be hired by a company as a manager.

As small independent  shops are are forced to close or merge with larger operations and FHA becomes more important you will see it become harder and harder to join a net branch mortgage company.

As companies consolidate more small shop operators and top loan originators will begin to migrate to larger companies. The majority of the larger mortgage companies are net branch operations. This will force those companies become more selective when deciding who to hire. In previous years it was a managers choice.  Companies were easy to join and managers could pick and choose companies. I think that is getting ready to change.

This post will give a perspective branch manager some tips on getting approved. We will discuss what a mortgage company looks for and how to present your self in the best possible way to increase your chances of approval.

First – what do companies look for in a net branch manager?

1. Origination Experience – Most companies want a minimum of 2-3 years loan origination experience.
2. Industry References – Your reputation with peers is important.
3. Management Experience – Previous mortgage branch management experience is preferred.
4. Credit – Many companies have set a minimum credit score requirement.
5. Background – Driving, criminal record searches are mandatory at most companies.
6. Plan – Have a written business plan.
7. Financial prepared – Have least 2 months operating expenses.

Second – How to present yourself.

1. Resume – you should have an updated resume that outlines your mortgage and management experience – There are a number of ways to organize your resume. All of them are acceptable as long as you highlight your origination and management experience. If you do not have mortgage management experience list any management experience that you have in another field.
2. References – The more the better. Make sure that the contact information is up to date and that the references you list expect the call.  Lack of response from references or bad contact information is a negative.
3. Credit – Credit will become a bigger concern. If your credit is good state that in your cover letter. If you have previous credit issues you should include a separate letter addressing the issue. KISS – Keep It Short and Simple.  If the issue is behind you use a few sentences explaining why it no longer an issue.
4. Background – If you have a good driving record and no blemishes on your record state it in your cover letter. If you do have previous issues use the same format given for credit explanations. Remember KISS!
5. Business Plan – You do not need to write “War and Peace” with spreadsheets. One page outlining your first six months of operation will work. The key is to not over sell what you will do.  The last thing a company want to see is someone with limited origination experience and little or no management experience stating that they will have 15 loan officers originating multi-state business in the first 3 months ( I get those calls).
6. Financially Prepared – Know your budget. what will it take to operate your branch every month. Rent, utilities, phone, advertising, branch fees,  etc.  Most companies will require a prospective branch manager to demonstrate that they have a minimum of 2-4 months in reserves to operate their branch.
7. Production History – You should be prepared to provide proof of income for the last 2 full years and Y.T.D. – How many units have you closed a month for the last 6 months? What is your average loan amount? What is your loan type mix – purchases vs refinances?
8. Source of business – Do you buy leads? Do you work with real estate agents? Explain how you source your business.

I hope this information helps give you a better idea of what a company will want to know and what you should be prepared to provide when you are considering applying for a net branch manage position.

Feel free to post any questions or comments.

Now let’s take a look at the next items on the list of important criteria you should consider if you are considering a net branch opportunity and intend to originate FHA loans.

• FHA originated using the corporate address or the branches?
• Corporate processing of FHA loans or at the branch?
• Level of the company’s experience with FHA?

Many companies offering net branch programs will let a branch originate conventional mortgages from the branch but they will require the net branch to send all FHA transaction to the corporate office for processing.

Why is this a problem?

There are several important issues that make this a practice you should be concerned about.

Control – the net branch has lost local control of their loan. The processing and placement is now in the control of someone who at best you have had phone conversations with. The borrower, real estate agent , and closing agent are now working with someone else or they are calling you for progress updates and you do not know. The loan is out of your control.

Compliance – when you put your name on the 1003 with an address that is not your branch address you are putting false information on the document. Some companies have lost their ability to originate FHA loan for putting false information on a 1003. A company that uses the centralized call center approval from HUD for FHA loans is stating to HUD that all FHA originating is done from that office. If you take the application (originate the loan) locally and then sent it to the call center for processing you are violating HUD law and could lose your license.

A key point to remember when you are looking for a net branch opportunity is that not all companies have done their homework when it come to compliance laws.

Some of this is due to lack of experience and some is due to a lack of concern for the rules.

You should always investigate the net branch companies experience level. This is even more important when you are going to originate FHA loans.

HUD does not always move swiftly to stop problem companies but they do catch them. When they do it either results in large fines and or loss of license.

Do your homework. Make sure you are really partnering with a net branch company with a proven track record with HUD (FHA / VA) loans.

For more information please visit: NetOriginator.com

If you find this information helpful please let me know. I always welcome suggestions, comments and new subscribers.
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Mortgage Net Branch -  Net Branch – Net Branch Opportunity

“What are your net branch fees and how long will it take to get approved?”

I speak to people everyday that are looking for a mortgage branch partnership. Many times the key questions are not asked.

The questions that I think are important to ask are:

1. Is your company HUD approved? – Also do they use the corporate address for all FHA loans or does each branch get HUD authority? In today’s market you have to have FHA! It should be a flag if you are told all FHA goes through the corporate office. There are several reasons why this is a problem. One is “Neighborhood Watch”. A centralized operation exposes the corporate address to potential company wide loss of HUD license. One of the other problems is that the address on the 1003 should reflect your real location.
2. If the company is HUD approved – how long have you been approved? – This is a very important question. A company that recently obtained their FHA approval is a novice in this area of lending. They are going to make errors that every novice makes. These errors could cost everyone in the company the ability to continue to close FHA loans.
3. Has your company ever been suspended or fined by HUD? The company’s track record with HUD is a good indication of their compliance knowledge and ability to manage their company.
4. Have any wholesale investors cut off or suspended your company in the last 24 months? – This is another great indicator of current and future problems. Suspensions or termination by wholesale investors tends to be viral. If it happened at one company it will happen at others. You do not want to work with a company that is losing wholesale investors due to audit and compliance errors.
5. How many branches do you have active? – Many companies have hundreds of branch offices and many cannot service the number of offices they have. This leads to high branch turnover. High turnover in any sales organization leads to problems.
6. Has your company had any buy back requests from investors? – How many buy back requests does it take to force a company to close their doors? Not many. If the average loan is $200,000 it only takes 5 to put the company $1,00,000.00 in debt.
7. How long has your company been in business? You might be surprised at the answers you get to this one. You would assume that it takes years to establish a company and build a large footprint. My personal opinion is that an answer of less than 5 – 8 years is a big whopping red flag.
8. How long has your company been involved in setting up branches? “Just a few years” would be a flag to me. A company with limited experience managing a large number of branch locations will go through a painful learning curve and take their branch managers along on the bumpy ride with them.

Is this every question you should ask? No – but this will give you most of the important ones. Each branch has a little different criteria that determine what is most important to that branch manager. The bottom line is do your homework. Remember the old saying “Look before you leap.”

I always welcome comments and questions.

How long will setup take?

These are the most common questions I am asked.

Are they the most important?

My answer is NO!

These are important questions but just about every company is close to the same answer.

Most companies are between $350 and $500 per file.
(We are $395 in most states)

Most companies are about 3-7 working days for your branch manager application to be approved.
(We are 2-3 days.)

Each state has different branch licensing requirements – so that step is dependent on which state you are in.

The questions that I think are important to ask are:

1. Is your company HUD approved?
2. If yes – how long have you been approved?
3. Has your company ever been suspended or fined by HUD?
4. Have any wholesale investors cut of or suspended your company in the last 24 months?
5. How many branches do you have active?
6. Does your company have any current buy back requests from investors?
7. How long has your company been in business?
8. How long has your company been involved in setting up branches?

In my next post I’ll explain why I think these are the most important questions to get answered if you are considering a net branch opportunity.

In my work speaking to prospective branch managers I hear this statement every day.

My answer / question is always the same. Are you sure?

I then ask several important questions.

• Have you researched the licensing requirements for loan officers and branch offices in the states where you are interested in originating?
• Are you aware that many states require licensing fees for a branch office to originate in their state?
• Are you aware that many states also requires fees for loan officers to originate in their state?
• Do you know that many states also require some type of continuing education in order to originate in their state?
• Do you know that some states require a physical location to originate in their state.
• Are you aware that some states like North Carolina require each loan officer to be licensed and that the education and test must be taken in person?
• Are you aware of the state specific compliance requirements for the states you where want to originate.

Some people thinking about opening a branch office of a national company think that they can originate in every state where the company is active without any additional time, effort, licensing or money. Unfortunately that is not true.

An “out of state” originator interested in developing business in Florida, California, Maryland, North Carolina, South Carolina, Ohio and many other states has to comply with each states licensing, education, disclosure and compliance requirements. Usually it does not work as intended.

Don’t misunderstand me, there are situations where you should work in more than one state.

• If you are in a border city like Kansas City, Missouri – you should also be licensed in Kansas.
• If you already have branches setup in more than one state – you should continue when you change companies.
• If you have established referral sources in other states – you should consider the investment of time and money to capitalize on those relationships.
• If you have an established office, you want to expand into another area and are prepared financially – that is a sound business decision.

The main point I am trying to make is that more or bigger is not alway better. Most offices “find” the majority of their business within 25 – 40 miles of their location.

Another related statement I hear is that there are other companies that allow me to originate in all states with out going through the licensing and education requirements.

I will try to address that topic in another post.

I always appreciate subscribers and welcome comments and questions.

For more mortgage net branch information visit: NetOriginator.com

This is a very important topic that many net branch companies do not want to address.

Q. Can you work for a mortgage net branch company and be paid all or part of your income as a 1099 contractor?

(There are many companies telling prospective branch managers that this is OK – legal – and that everyone at the branch can be paid by 1099.)

A. WRONG!

Many companies are also paying loan officers and managers as 1099 contractors on FHA and VA (HUD) loans.

This is VERY WRONG!

Let review the 2nd issue – Originating HUD (FHA/VA) loan and being paid by 1099.

Read this summary memo from HUD regarding an audit to determine if independent contractors are being use to originate HUD loans.

Summary Link

It is absolutely clear that this is an illegal practice.

Now let’s address the more general practice of paying branches and loan officers as 1099 contractors. Many people think that it’s OK if you are not originating HUD loans.

The defining source for this is the Internal Revenue Service.

Many state are silent on this issue, and even if they allow it the federal government does not.

The IRS has a form called SS8 it is a 20 question form to determine if an individual qualifies for 1099 contractor status. No loan officer has ever qualified for 1099 independent status.

Here is another link to the IRS that covers this question in detail.
Topic 762 – Independent Contractor vs. Employee
To determine whether a worker is an independent contractor or an employee under common law, you must examine the relationship between the worker and the business. All evidence of control and independence in this relationship should be considered. The facts that provide this evidence fall into three categories – Behavioral Control, Financial Control, and the Type of Relationship itself.

If the company requires you to use specific forms, requires you to use their vendors – appraisers, title companies, investors, etc., if must put your loans through their company, if you work under their license, you are not an independent contractor you are a W-2 employee.

If you are working as a 1099 loan originator you could be subject to large fines from the IRS.

Does the company I represent pay people as 1099 contractors? Absolutely not!

As you consider a net branch company to work with make sure you are picking a company that is in compliance with the rules and regulations we all have to follow.

Even if you are not conducting your business this way if your company is and they get caught you will be left out in the rain with everyone else in that company.

I always appreciate subscribers and welcome comments and questions.

For more mortgage net branch information visit:
NetOriginator.com