By George Allen

The proliferation of mortgage companies offering Net Branch Opportunities has exploded over the last couple of years, and the reason simple. The concept offers an excellent way for lenders to grow with minimal expense. At the same time the Branch Manager enjoys an excellent compensation plan and the freedom to run their branch as they see fit. In this article we’ll attempt to define net branching, and offer guidance to the loan officer or manager who is considering making the move and opening their branch.

The most difficult section of this article, although a very important one is defining what a Net Branch is. This is difficult because at the time of this writing, there are over 250 companies offering some type of branch opportunity. With that many companies, it’s nearly impossible to identify or define the concept because no two programs are exactly the same. Essentially, net branching is an alternative form of compensation to the manager. Now I know that’s pretty simplified, but that’s what it is. You may ask; But an alternative to what? Let’s look at it like this. You’re a top producer at your company, and there’s an opening for you to be promoted to manager. More than likely you’ll be offered a salary, commission overrides on your loan officer’s production, and commissions on your production. You may also be paid based on the profitability of the branch. Your employer will probably negotiate the lease for your location, as well as the office equipment. They’ll also direct you when, and if, you can hire additional staff, at the same time setting the salary and commission ranges. I’ll call this a “Traditional Branch.” The company is taking on the risk that you’ll stay there as a happy manager for a long time. Because of this financial risk, the company enjoys a bigger piece of the profit pie, and the manager less. In a Net Branch opportunity, the manager is paid on the net profit of the branch. What makes this an attractive alternative, is that the manager makes virtually all financial decisions. From negotiating the rent, to salaries, or where to purchase supplies. The manager is in control of the operating expenses, and thus in control of his/her income. I’ll call this form of manager a “Professional Partner,” because an individual interested in this program must be a professional, think outside the box of the traditional employee/employer relationship, and think more like a partner. The manager enjoys a bigger slice of the profit pie. So if I may be so bold to offer my definition; a Net Branch is an alternative form of compensation to the branch manager, based on the profitability of the branch.

Now that we have the basic definition down, where’s the confusion? Because there are so many companies offering opportunities today, there are several forms of compensation. There are huge differences. Some companies offer 100% commissions. One hundred percent of what? Does this mean the corporate office earns zero percent? I’ve heard of the 90/10 splits, and 80/20 splits. How are loans priced? What rates does the manager see? Are they published by the corporate office, or direct from the investor? Are they wholesale prices or correspondent prices with servicing release premiums? What about junk fees? Is the company a Broker, a Banker or both? Who pays the bills? How are loans underwritten and closed?

What about benefits? Who handles payroll?

I just received a tape recording of a voice mail left by an Apex employee on the answering machine of a branch manager, telling him (shouting) that unless he could get the borrower to sign a GFE after the settlement, the branch manager should go and flip burgers for a living. The manager does not want to back-date a GFE and nor does the borrower but Apex doesn’t seem to care.

I may place this recording on my website for everyone to hear.