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Below is my first thread on Mortgagemag’s net branch forum. If you have any questions or want to share anything with me please fill out this form:
Topic: I have noticed something interesting |
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posted 01-20-2004 03:43 PM01-20-2004 03:43 PM
I have noticed that most of the net branch companies visiting this forum do not respond to experienced loan originators looking for a “net branch” deal that makes sense.
Most of them offer 100% commission on in-house products, with marked up rate sheets. They offer 100% on brokered loans but want $500 to $800 per deal, which in reality adds up to only 60% to 75% on an average A paper loan, or they blend 90% plus $200 per loan (minimum fee of $300 even if the loan generated only $500 in fees), which again adds up to 75% to 80% on the average loan. You can no longer make $5K on every loan when you are competing in cyberspace and you want to do volume. Additionally, they want the manager to hire staff, rent office space and lease equipment but will not sign a fixed term employment contract with the manager. So, after six months they can fire the manager, at will, or change his pay plan and he will be stuck with all the commitments with no recourse.
Is there a single net Brach company out there who is willing to offer a deal that makes sense?
What is a real deal? 90% of gross fees with no minimum fee per loan and no other junk fees and a three year contract with a “good cause” clause for termination. If each branch closes only 10 loans per month and the average (not median) fee per loan is only $2000.00, the net branch company will make $2000 per branch, per month.
What is wrong with $2k per month with no capital investment or financial risk? How much can it cost to review a file and cut a check? Multiply that by only 300 branches and you are making over $7 Million per year with very little risk or investment. With this pay plan it is feasible to have over 500 branches and make over $12 Million per year, with relatively little investment, low overhead and an extremely high pre tax margin and ROI.
I am open to debate or offer.
Godfather
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posted 01-20-2004 08:06 PM01-20-2004 08:06 PM
Hi Godfather, that is an interesting question. I agree with you. It seems that there are many companies that offer those “teasing” opportunities. If I may say, I think that ours is probably the most attractive:
100% commissions
1-4 units closed $595 per loan cost to you
5 or more closed $475 per loan cost to you
any loan that is a HELOC or loan amount of $25,000 you pay $100
If you “bank” the loan we only charge $295 per loan (regardless of units closed).
We pass the “off sheet” pricing on to you and the correspondent pricing is yours. Any “preferred” pricing is passed on to you.
What do you think? You can go to www.acmcjobs.com to check us out. Either emails me at steffenvanderberg@yahoo.com or give me a call with any questions 616-293-7266.
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posted 01-20-2004 09:24 PM01-20-2004 09:24 PM
What other fees are you charging Steven? If you stop and think about it your fee is HIGH for most of us. Based on a normal loan amount. Your fee averages out over 3/4 point per loan. How many loans do you have to close a month, with your company? W-2 or 1099? FHA? VA? Subprime? What? If W-2 how are you making money and paying employer side of Taxes? 1099 is illegal I heard if we are considered a employee. Fill us all in please, and stop the bull.
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posted 01-20-2004 10:10 PM01-20-2004 10:10 PM
Stefvb,
I appreciate the response but what you are offering is exactly what I was complaining about. You are asking for $475 per loan regardless of the fees generated by a loan. So on my average loan when I make a gross fee of $2000, I would have to pay your company 25%($475), pay my LO 50% ($1000) and by the time I have paid for my advertising costs and office overhead I will be in the red.
I really do not understand why people work for companies like Carteret. It is better to work for a broker as an in-house LO and make 60% as opposed to making 70%/75% with Carteret and having to pay for all your own expenses, licenses and payroll taxes. When you do the math you will notice what I am talking about. The problem is that most people do not analyze the numbers to realize this.
Unless you get to keep 90% of the fees on every loan and a three year employment contract, it is absolutely ridiculous to consider taking all the financial risks of opening a net branch, buying or leasing computers, paying for state licenses, signing a three-year commercial lease with a personal guarantee, hiring processors and loan officers, spending thousands of dollars on marketing campaigns, etc….
If I generate only 10 loans per month, I would be paying you $5K every month. That is $60K per year. What am I getting in return? I only need a handful of lenders that I do business with and I only need one state license to do 10 loans per month. So why would I pay a net branch company $60K per year for the benefit of using their license in one state and access to five lenders?
The attraction of your deal becomes even less if I were a high producing branch, originating loans in three states. A branch producing 30 loans per month would pay your company $200K per year for the benefit of using the same five or six lenders in three states.
Show me the value and I will sign up. What do I get for my $5K per month? I can out-source payroll and compliance for a lot less than that and I do not need 200 lenders and 25 state licenses. How many, average size, net branches originate loans in 25 states or use 200 lenders? The average “successful” net branch has three loan officers and closes 10 to 15 loans per month with only a handful of lenders in one state.
I welcome more comments and I would like to know what I am missing in this picture.
Godfather |
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posted 01-21-2004 06:01 PM01-21-2004 06:01 PM
I would have to agree with godfather, but have you looked into ALL Funds or even better Premier Mortgage Funding? They offer a flat $1500 a month fee with no per loan charges for 0-30 units per month and $1100 per month for 31+ units per month.
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posted 01-22-2004 07:42 AM01-22-2004 07:42 AM
No bull here.
For some people, net branching is nopt the way to go. Answer three people in one reply will be tough, but I am up to try.
Let’s look at this from a simple mathematics stand point:
A person is going to write 5 loans a month.
Rent- $150/m (executive office suite or from home)
Phone-$150/m
Courier-$50 (bal. from unclosed loans)
Credit report-$150/m
Postage-$50/m
Copies-$150/m
Total expenses: $700/m
One person closing 5 loans a month @ $200/loan=$10,000
Adjusted gross profit at $9,300. You want to pay yourself $5,000/m salary? OK, then after taking the salary and covering your payroll tax at aprox 13% ($650) you would have $3,650 left in your account. KEEP IN MIND THAT YOU ARE RUNNING A BUSINESS, NOT KEEPING ALL THE REVENUES!
I fyou hire someone to originate for you and the standards are the same for that person, you just made an additional $3650/m or $43,800/year.
I think Godfather has no interest in being in business for himself, and that is ok. Personally, I discovered after 2.5 years of net branching that I am not a good “business owner” or net branch manager. I had 6 employees when I started my first branch, and none of them are still with me today (2.5 years later). At one point I had 3 full time processors and we were crunching out 50 loans a month and originating 80 loans a month. I decided that I didn’t want to deal with all the stuff anymore and got out.
If Godfather wants to discuss the true benefit of net branching in person, then give me a call. There are companies out there that charge a “flat” fee per month, like alk said. But my question is how long are they going to survive? A net branch group can only handle some where around 350-400 branches a year. That is only $600,000 to the “flat fee” company. “per loan” charging companies are going to make more money and we all now why people are in this business, too make as much money as possible. You just need to find a company that is not going to lead you down a path of B.S. like Eric is afraid I am suing. I challenge anyone to give me a call at 616-293-7266 and tell me why net branching is not a good thing. Some people are ok, being in charge and the boss and some people are not. It is simple math. I don’t know, but I think that if a company is truly going to give you every benefit, then how can they grow? You want to give them 10% of the profit? Mc Donalds gets more than that and they have had one of the most successful businesses in the world for over 30 years.
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posted 01-22-2004 08:52 AM01-22-2004 08:52 AM
From what Godfather is saying I have one question. If you only want to deal with five lenders and one state, why don’t you go get your state license sign up with lenders and deal with everything yourself? Why you are bugging people who think bigger than that and are actual net branch candidates?
Thanks
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posted 01-22-2004 10:42 AM01-22-2004 10:42 AM
Maybe I can shed some light on this.
I work for Carteret and have been here over 4 years and have been very happy so far.
I get paid 75% commission on all fees’ front and back. Our processing fee is $300 that goes to Carteret.
I have several LO’s that I have hired and I am considered their “Mentor”. All the policy questions from these lo have come to me instead of going to the corporate office. For this I get 5% of their commissions but they still get the full 70% We get a bump to 75% for production.
Now Godfather you may think that it’s not worth it but it is. I work from home so my overhead is low but more important; I am left alone to conduct my own business. I don’t have anybody looking over my shoulder and I know exactly how much money I am making. I have worked at several Brokers and been on those crazy “tiered” pay scales.
We process close and post close our own files and within 10 days of turning the file into corporate our paycheck is direct deposit. Files are tracked on line so we know within 48 hours if there is any post closing audit issue that would hold up our paycheck.
All of our payroll taxes are paid and we can lend in multiple states and are VA and FHA approved. We also have discount pricing and underwriting with several of the large premier lenders.
This is a very fair system for several reasons.
Nobody bothers you, you can do sub prime ,conv,fha ,va. whatever you like.
You can work at home and be with your family.
Payroll is handled for you.
If you do the math and figure the cost of getting your own license and paying your own taxes and ss it it hard to get a better deal.
Posts: 8 | From: Virginia | Registered: Jan 2004 | |
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posted 01-22-2004 12:59 PM01-22-2004 12:59 PM
To the Forum,
I must say this is the best-addressed topic I have seen so far in this forum. What the Godfather wants is a Parent company that charges a small fee with all the benefits of a full service bank. He doesn’t want any additional built in fees or penalties for a banker or brokered loan and he would like a three year contract. First, any bank I’ve seen offering a flat fee is not capable of providing superior service to the branch locations as more branches sign on. The revenue coming in will not cover the additional staff needed to provide service to the branches.
I have received many calls from mortgage professionals that want to make a move because a parent company does not supply much needed support to its branch locations. More importantly, if a financial institution is signing on anyone and everyone, who is monitoring the LO or Branches activities. Is that branch reputable? Are they doing the right things by their clients? A company’s name can be destroyed in a territory by one branch’s activities. The parent company can even lose investors due to a branch’s activities. The question you want to ask here is, does the parent company truly care about you or are you just a number? If you’re content with just being a number, don’t expect outstanding service. Is the parent company looking only to line their pockets with hundreds of branches that they have no control over and do not monitor? One of the biggest branching companies has exactly this problem. They do not even know how many branches work for them. That’s bad business and usually will have damaging recourse. How do you build a rewarding mortgage empire? With service, commitment and a true sense of understanding of your client. Your client’s needs are first. If your parent company does not aspire to this basic need how can you grow a successful location? Do they offer training if needed? Can you get a knowledgeable person on the phone when you call? Can you get a loan committed thru corporate within 48 hours? Does corporate quote you the best rate in the market without padding? Can you close the loan within three days of submitting a complete package? Did corporate train you and your staff on flow procedures to ensure a timely process? Do you trust them? How long have they been in business? These are all questions you should be asking when entertaining a branch venture. As far as an extended contract, any contract with anyone I’ve seen is at will. This is the industry standard. The branch LO’s allegiance is always with the branch manager, unless the manager is incompetent. If that is the case changes should be made. If a competent manager leaves the parent company the LO,s usually follow.
I have been in this industry for 14 years and to me a percentage-based fee per loan makes the best sense for growth on both ends. No penalty for banker or brokered loans. No padded internal rate sheet for branches. Branches get full SRP. If you are looking for the least input, expect the least output. I’d rather have quality than quantity. Ever hear that before? Repeat business is based on this principal. Anyone have any questions feel free to call me at 1-800-991-2274.
Scott Panasuk
Regional Sales Manager
All American Mortgage Bankers
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Scott Panasuk
Posts: 16 | From: 333 Earle Ovington Blvd. | Registered: Dec 2003 | |
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posted 01-22-2004 04:03 PM01-22-2004 04:03 PM
Scott has a very good point.
Percentage based splits do make the most sense for all involved. Quality and how you treat your branches are a plus.
Some people need support and others like me are OK with being left out on thier own island.
Theres pro and con either way but it depends on your lifestyle and customer base.
No offense Godfather but it seems that you are asking for the max commission and back office support, it’s hard to get both.
Posts: 8 | From: Virginia | Registered: Jan 2004 | |
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posted 01-22-2004 09:49 PM01-22-2004 09:49 PM
I agree with Scott and Carl. Except, that with the right companyt, you can get max cxommissions and back room support. It seems that peole that want everything and not willing to give anything are the ones that seem to be the most “needy”. It is best to “prioritize”, your needs and “wish list”. Missouri bings up a good point to. If you only want to work in your state and have to del with the responsibilty of E&O, HUMDA, HUD, RESPA, accounting and quality control, then go ahead and get your own license. If you wanna just write 5 loans a month, max the maximum amount possible, and still allow the “company” to generate a profit to grow, then look at net rbanching. If you simply want to just write loans and not worry about all the other stuff, then go and work for a bank or local broker. There are definately pros and cons to all of the opportunities, people have to just pick and choose what is importnat to them.
Just my humble opinion.
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posted 01-23-2004 04:08 AM01-23-2004 04:08 AM
I am glad there is much interest in this subject. Let me tell you a little background info. I average about $5 million a month in personal production and my goal is to go nationwide. I would love to do it with a net branch company but here are the problems:
1- No one in their right mind should work on an “at will” basis if they are investing money in their branches. What will happen if you get in to an argument with the corporate over something very small in nature but enough to piss them off and terminate your contract? You are shit out of luck with no recourse.
2- No one should sign a contract that does not allow for a jury trial and award of legal fees to the winning party. What can you do if they decide to f**k you over $50K and kick you out? It is done everyday by the most “reputable” companies.
3- I have no problem with a percentage deal but anything under 90% does not make sense on paper. You can add the cost of all the departments within a net branch company and if they have enough branches it adds up to less than $100 per branch, per month. That represents a 50% gross margin on a 90/10 split with $2k average fee per loan and only 10 loans per month for each branch (I was doing 40 per month with myself and another LO). How many industries do you know with a 50% gross margin?
My point is very simple - the guys who are making real money are the indi brokers and net branch owners and not the managers. I am amazed how Carteret has managed to brainwash their loan officers to think that they have a great deal. It sounds like a cult to me. The owner sent me what appeared to be a chain letter pretending that he had invented the net branch concept out of his bedroom. He is a great illusion artist and is making millions but his loan officers make an average of less than $200k per year.
I know of all the companies who offer fixed monthly fees but when you read their contracts you realize that they could change it without notice, after you have signed a five year lease and put up $100K to open your branch. You have to agree to arbitrate your diputes which gives them an immense advantage and if you don’t like it they will fire you and not pay you. What are you going to do?
Please do not tell me that there are honest companies out there. I am sure there are a few except you never know who they are. It is human nature to want to win every battle and conquer the world. Our own president creates a war to allow his associates make huge amounts of money and you are trying to tell me that I can trust comapnies with a contract not worth the paper it is written on? Get real.
Godfather |
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posted 01-23-2004 06:30 AM01-23-2004 06:30 AM
Well, if you think that it is all that cheap and easy, then go ahead and good luck!
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posted 01-23-2004 10:40 AM01-23-2004 10:40 AM
Dear GF,
There are honest companies out there. I am with one of them. I came from a large branching company with 100 branches who had similar issues to the one’s you mentioned. It took three months to locate a financial institution whose owner is trustworthy, the staff has 4+ years experience and has been lending for over 19 years. Service, integrity and compliance are crucial in the parent company’s back office no matter what split you get. Do your research and don’t get brainwashed by chain letters. (Can you send me a copy of that letter?) Good luck.
Scott Panasuk
All American Mortgage Bankers
1-800-991-2274
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Scott Panasuk
Posts: 16 | From: 333 Earle Ovington Blvd. | Registered: Dec 2003 | |
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posted 01-23-2004 11:54 AM01-23-2004 11:54 AM
Godfather,
Again you sound like you want all the reward without the risk.
I simply offered my views and now you turn on Carteret saying I am “brainwashed”
As I stated It’s a lifestyle choice for me and Carteret has given me the tools that fit my lifestyle.
When I came on to Carteret I was hired directly by the owner and it was a small shop with about 150 loan officers.
Carteret has grown to be one of the largest brokers in the country; it has suffered some growing pains as all businesses do.
Many of the top producers here make in excess of 75,000 a month.
You say you produce 5 million in loans a month, big deal, what is your average fees?
Think about what you are asking for. You want to go nationwide but not be held responsible or fired at any time. What happens if one of your loan officers has committed fraud or has a client default and the corporation has to buy back the loan? How are you going to track your loan officers nationwide? Add the cost of management, auditors and support staff and you can see that at a 90/10 split the house is not making the money that you make it out to be. Where did you come up with $100 per branch per month?
Call me brainwashed all you want but to say that the owner of Carteret is an illusion artist is way off base. I know the man he is a friend and a boss. I don’t always agree on policy but who does?
When you become as successful as the owner of Carteret than you can talk shit, again you want to have someone else take all the risk, while you reap the benefits.
Posts: 8 | From: Virginia | Registered: Jan 2004 | |
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posted 01-24-2004 02:58 AM01-24-2004 02:58 AM
Carl,
I am glad that some of your fellow loan officers are making a million per year. Except that any day they could lose it because they do not have a fixed term contract. “At will” employment is for administrative staff who have to compete with twenty other people for the same job. A high producer should not be at the mercy of the owner of the company. As long as he does not do anything illegal he should have the security of a contract.
I understand that every company wants to have total power over its employees and the fear of losing your job for no cause gives the management way too much power. In a fair contract no party should have a huge advantage over the other. No party should be able to get away with not paying his obligations with no fear of recourse. If you sign the Allied or Carteret contracts you cannot sue them in a court of law for unpaid wages and get your legal fees if you win.
Scott, I have news for you. A few months ago I negotiated a three year contract with the right to sue and collect attorney’s fees and a 90/10 split. This company is owned by a huge holding company. Well, they forgot that I had changed their standard contract and fired me to avoid paying me for some loans (it is a long story). I have a lawyer on contingency suing them for a million and although it may take two years I will eventually collect back pay and front pay in addition to legal fees. Had I not changed their standard contract I would have had no leg to stand on and would be out of a job and 90K in unpaid commissions.
My point is that every contract needs to be negotiated so that both sides are on a level playing field. The more educated and productive executives in any industry never sign whatever is put in front of them. I cannot understand the people who just sign on the dotted line without even reading a contract. If an employer wants me bad enough then they need to negotiate their contract. As far as the split is concerned, I guess the free market will eventually determine the right split. This model is experiencing major growth and as more companies enter the market the splits will become larger and larger to attract the best loan officers. The best loan officers have the right to demand a fair contract and “you don’t get what you don’t ask for”. It is all about money and no one will give it to you without a good fight. I did not create this world but these appear to be the laws of nature. We are all in a rat race and the faster (not nicer) rat will win the race.
Sorry for being a realist….
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Godfather |
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posted 01-24-2004 03:21 AM01-24-2004 03:21 AM
I need to ask one more question.
Why would any sane individual invest money in opening a branch, signing a lease, buying equipment, recruiting staff, etc… without a fixed term contract?
What will happen if he gets in to an argument with the company and they terminate him? Over a simple argument he could lose his investment over night or spend months searching for another company who may do the same to him six months later.
I would appreciate a logical answer.
Godfather | |
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posted 01-24-2004 06:42 AM01-24-2004 06:42 AM
Fellows,
please forgive me for rambling on but my mind will not let me rest and I need to raise these issues since we have a number of intelligent people participating in this debate. First, I must disclose that I am a full-fledged capitalist but that does not make me support the concept of powerful and well-informed companies hiring talented yet not so perceptive people and making them sign employment contracts, which effectively deprives them of their statutory rights.
Let me place our business model in another setting. Let’s compare a net branch with a franchise and there are many similarities between the two business models. Would you hand over a $20K Franchise fee and an additional $50K in capital investments if you had to sign a month-to- month lease and the franchisor could terminate your franchise at will? The ones who answer yes to this question did not graduate from Harvard Business School and I am willing to bet on it. Let us use another example: would you buy a restaurant and spend $100K in leasehold improvements and equipment if there was only one month remaining on the existing lease? Would you buy it if the Landlord told you not to worry about the lease since as long as you paid your rent on time he would have no reason to evict you? What would you do if six months later when you have just started making good money the Landlord approached you and told you that he had just got an unbelievable offer for his building and had agreed to sell it. You would have to move out in month. Are these fears so farfetched? Am I overly paranoid? Would the Landlord honor his word to you and pass up on a deal of a lifetime?
Why do we not play by the same rules, which apply to 99% of the business world? As net branch managers, are we not worthy of the same level of security and legal protections offered to and demanded by other entrepreneurs? Why do we allow net branch companies to treat us the way they treat their filing clerks. Besides making a lot more money than a clerk we do not have much more benefits or rewards. Instead, we are exposed to considerable financial risks and intolerable stress levels.
However, the main puzzle is that we may work for a net branch for 10 years. We may contribute to their growth by risking our own money and opening multiple branches in numerous states, yet at the end we will have nothing tangible we could sell to retire or to pass on to our children. While, the company has grown from the fruits of our labor and the owner can cash out and live like a king, we would have to keep looking for the next job.
I predict in two years, we will have a few major players each with 5000 or more loan officers/net branches on a 90/10 split. They will employ economies of scale and automation, which would allow each of them to net a minimum pretax profit of $25Million per year. I do not agree with Steve’s belief that each company can handle only 300 branches. In my opinion, the sky is the limit for well-managed and innovative companies. What will stop a company to grow to 5000 branches, working either out of their homes (glorified loan officers) or out of a large office with 50 loan officers and closing from ten to 500 loans per month each? Technology will facilitate this in no time and mortgages will become simple commodities traded in cyberspace at minimal margins but huge quantities. Expertise and knowledge will be easily accessible through highly advanced software and the average loan process will take 48 hours without the need for much human interference. Branding will be the only tool to differentiate the winners from the losers and creative product development will be the name of the game.
What do you think will make the average homebuyer more satisfied with his mortgage? The fact that he had a MIT genius as a loan officer, who could answer every single finance quiz, or that he got the best rate compared to his neighbors. Volume and price will drive the market and that is why anything less than a 90/10 split will not work for much longer.
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posted 01-24-2004 08:38 AM01-24-2004 08:38 AM
So, what you want (in a nut shell) is a 3 year employment contract, a 90/10 split, and an exit strategy for both parties and the right to be represented by legal counsel instead of an arbitrator?
If this is so, please forward me a private message or call me at 616-293-7266 (M-F 9-9 and Sat 9-5 (ET). I may have an opportunity for you with a company that is looking for someone that has proven track record and history over the last 5 years. They may want to chat with you Gf.
Steffen Vander Berg
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| Carl
New Member
Member # 1210
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posted 01-24-2004 11:27 AM01-24-2004 11:27 AM
Well Father I am sorry that you have had a hard time and have to go through the hassle of suing someone to collect what is rightfully yours.
I see your point about “at will” employment and I would not want to have to worry about being fired without cause. I feel secure where I am but it could happen anytime. Our contracts do have a provision for payment of all due commissions within a 90 day period of dismissal.
The other part of the equation is that since most companies are only on it for the bottom line, The top producers get special treatment. It does not make sense for an employer to fire these LO’S for no reason, it hurts the bottom line.
You bring up something that is interesting. If you do invest in opening branches and laying out the cost for them then those branches are yours.
If the worst happens and your parent company fires you, you could open under another name overnight. I have seen this happen. It is not the best situation but the branches are yours, since you are laying out the money for it.
I have a saying that this is a 9 to 12 job. If you get fired at 9 you can have a new job by 12. This is not any kind of consolidation if you get screwed out of your commissions, but you can carry on.
I wanted to know also Godfather; if you find the contract you are looking for, should the parent company recoup the cost from you of a buyback?
I addressed this in a previous post and would ask it again. Since you want to be on equal footing with your employer it should work both ways.
Your point about the future of this business is interesting. I am not sure if it will come to that, but the technology is leading us down that path. Since I am a “Glorified Loan officer” (thanks for the insult) I am already heading down that path. I can take a loan app, order title and appraisal, underwrite and lock the deal in less than an hour. I can do this from the comfort of my home, why would I invest thousands of dollars for a branch if I can do the same at a fraction of the cost? The loan officers that work under me do the same. This gives us more time to be out getting referrals, instead of the day to day grind of operating a bricks and mortar shop or hiring a manager to do that.
Your goals of having branches nationwide is a big undertaking and I wish you success. It’s just not something for everyone. I am sorry that you have been screwed over in the past. I have been very lucky in that regard. Best of luck to you.
Posts: 8 | From: Virginia | Registered: Jan 2004 | |
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posted 01-24-2004 02:21 PM01-24-2004 02:21 PM
Carl,
The branch is not worth anything unless you can sell it. The lease is mine, the computers are mine, the bills are mine but the “business” is not mine to sell as a going concern. If I open twenty net branches I cannot sell them to a big company and cash out. I can sell a franchise as a going concern but not a net branch. Why not? That is my question.
|Godfather | |
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posted 01-24-2004 03:41 PM01-24-2004 03:41 PM
Carl,
Now in answer to your question about buybacks, I need to clarify my position with regards to a fair contract allowing both parties to play on a level playing field. Every contract involves two or more parties who each perform a separate function in return for compensation.
When I refer to a fair contract on an equal footing I do not mean that all parties should bring the same ingredients to the table. I do not expect the net branch company to pay for my marketing misses (bad leads, etc..), equipment repairs or unproductive salaried employees and similarly I should not have to pay for the buyback of a bad loan, which is their contribution to the contract in return for what they make from all the good loans. Every party to the contract performs an independent function and takes independent risks. My point is that the rights (not the functions) of the parties should be fair and equitable. No party should have the upper hand and have unfair control over the other.
Your contract may allow for the payment of commissions after termination but the contract is not worth the paper it is written on unless it is financially feasible to enforce it. I really do not believe your contract is easily enforceable by you, yet immensely enforceable by Carteret. That is what I mean by not being on a level playing field. Your income is at their mercy. In the event of a major disagreement you could be terminated and not receive your commissions, without much recourse (real recourse as opposed to paper recourse).
I hope this answers your question.
Godfather | |
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| Carl
New Member
Member # 1210
Rate Member |
posted 01-24-2004 04:23 PM01-24-2004 04:23 PM
Thanks for the reply. You have cleared several things up for me.
Since Carteret is privately owned and I know the owner, I have a higher comfort level. Of course there is nothing keeping them from screwing me over, point talked. I also know to keep my options open in case something happens, like Carteret getting sold to someone who wants to take it in another direction.
You bring up an interesting point about being able to sell your net branches to another company. I don’t see how that’s ever going to happen unless the license is in your own name.
Your only own the lease, equipment and other costs. You are the Driver.
The parent company has the licensing, credit lines, and wholesale relationships to enable your branch to flourish. The parent company is the vehicle, and you are the driver. You can change the vehicle but you can’t make the vehicle into something else. In other words you are only leasing the vehicle. Since you aren’t on title to the vehicle itself you can’t sell it. Now you could find another driver and still collect overages. Perhaps there is something I am missing in your point.
Good luck and I hope you find a company that you are comfortable with.
Posts: 8 | From: Virginia | Registered: Jan 2004 | |
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posted 01-25-2004 09:21 AM01-25-2004 09:21 AM
You know that recently the Federal Supreme Court award back pay to LO’s ( I don’t remember the company, but it was like an Ames or something like that )the back pay that they owed. LO’s that didn’t get paid one month because they close anything and were straight commission. Right now with the Fed govt. getting so worked up in Congress about mortgage lending, even the threat of exposure to a Grand Jury has some companies a little scared. Gf, did you write a letter to the NAMB or the Mortgage Banker boards? Sometimes that causes a little “concern” for the employing company.
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posted 01-25-2004 05:41 PM01-25-2004 05:41 PM
Carl,
I understand the fact that the license is not mine. However, you can overcome that by allowing the branch manager to assign the branch license to a potential buyer of his branch. The problem is with the “At Will” nature of the contract. If a branch manager is going to invest in opening a “real” branch, then he should have a long term contract, which he can assign to a qualified buyer of his branch. His split should also be fixed for the length of the contract. His client list should also be his property and not the parent company’s.
When a broker enters in to a correspondent relationship with a lender, who owns the client list? The broker can maintain his relationship with his clients after terminating his relationship with the investor. But the net branches want to own the clients files too. Many of their contracts do not allow you to communicate with your clients after you leave the net branch. The whole deal is extremely one-sided. This is why I keep saying that anything other than a 90/10 split does not make sense.
Under the current system after ten years of operating a branch and developing a name and “good will” for your branch, you cannot sell it. It is insane.
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Godfather | |
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posted 01-26-2004 03:13 AM01-26-2004 03:13 AM
I have worked for a number of “Good” companies out there like, E-Trade,Ditech and Green light.
As I was an employee at these companies, I saw the many things happen to the LO’s as Godfather has said. E-trade would Fire people right before the end of the funding month and keep all the comm. pay that was owed to the LO’s.
As well as the other two companies. If these well known groups are doing this everyday…what makes you think that other not so known companies will not do it to you? After all the money and the time you spend making your net-branch go to the next level?
I guess one way of making sure that you are able to protect yourself is to have your own broker lic., so when they do this do you, you can bounce back on your own two feet.
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posted 01-26-2004 11:33 AM01-26-2004 11:33 AM
Scarface,
Thank you for being brave enough to confirm my fears. I would like responses from the rest of you on what Scarface has experienced.
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posted 01-26-2004 03:07 PM01-26-2004 03:07 PM
Godfather,
As I see it, you can use the Net-Branch name to your own advantage by building your reputation as Honest, Trustworthy and loyal broker…and not by selling your net-branch name. So when the time comes (and it will come) to brake away from your net-branch, you can do so at easy. For you have built the company around your morels and NOT around the net-branch name.
If you don’t have a broker’s license, what other options do you have BUT to use a net-branch to use as a lunching pad. In regards to the employment contract…in the State of CA and other States, you are an AT WILL EMPLOYEE from day one. That’s the way CA law sees it.
Side Note:
As what actions have been taken against those companies names that I have listed in the privies comment…E-trade has settled a fine for lump sum of a little less than $10Million last month. Ditech is in the works of settling there claim as well…(which have paid a fine before for the same action that it has taken few months for the a little less than $10Million.
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posted 01-26-2004 08:04 PM01-26-2004 08:04 PM
Scarface,
“At Will” status has nothing to do with contact laws. You can easily overcome that by signing a contract that is fixed for 3 or 4 years and does not allow the employer to terminate the contract at will and for no cause.
Everyone says this is standard policy. There is no such thing as standard policy for every company in this industry. Contracts need to be drafted and negotiated by both parties. The average employee is not savvy enough to negotiate a contract. I bet if the roles were reversed the employer would not sign his own contract.
I find it very interesting that we have not received any posts since you confirmed my concerns and affirmed my contention that if you do not protect yourself you are going to get screwed eventually, even by the biggest household names.
I guess my point was well made and can no longer be rebuffed.
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posted 01-26-2004 10:11 PM01-26-2004 10:11 PM
Godfather,
It is very difficult to discuss this with you. You’re hell bent on being right and although, I can’t completely disagree with you, the point has been made that you want to have your cake and eat it too. It has already been said that you want all the reward without the risk. That to me (even though I am an employee) just doesn’t work in any business model. As I said before, even a McDonalds franchise pays more for their franchise fee than what you are willing to pay. I guess we all just got tired of listening to you try to justify to the rest of the industry that we are all “stupid” and “insane”. I have only once been fired because of a disagreement with the owner of a senior manager of a company and that is what caused me to get into net branching. I was able to prove my point to the owners of that company and was rehired. Then I quit, just because that company would allow a senior manager to have the power to fire their top producer. Again, none of us enjoy being talked down to and belittled by a stinger. At least that was the reason that I stopped replying. I was just followed along to see what the others thought of your situation.
In direct response to you, it is my belief that you did something serious enough for a company to get rid of a “top producer”. As Scarface said, most companies are money driven. They aren’t going to drop a money maker because they don’t like the way you look one day or simply disagreed with them. If you are indeed suing your former employer, I wish you luck in that endeavor. Otherwise, get a clue, you aren’t going to get ehat you want, unless you do it yourself. I personally think that you made a mistake on something and like (very generalized statement here, and I mean no disrespect to the truly professional people in the business) most mortgage sales people, are placing the blame somewhere else or on someone else.
As I said before, good luck in your endeavors and in the that lawsuit.
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posted 01-27-2004 03:04 PM01-27-2004 03:04 PM
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posted 01-27-2004 04:27 PM01-27-2004 04:27 PM
Steffen,
I apologize if I appeared to be talking down on anyone. Sometimes the written word can misrepresent the writer’s true attitude and tone. The purpose of this forum is not to get in to a pissing match with others in the industry and that was not my intention.
Thank you for your well wishes and I assure you that there was no misconduct on my part. If the termination was for good cause, I would not have been able to find an attorney to represent me on contingency and front all the costs on my behalf to litigate this case. Lawyers never take a case on contingency unless it has real merit and a high chance of victory. Otherwise, every company would have hundreds of lawsuits filed against it, by fired employees.
Contrary to your belief that a 90/10 split does not make sense, there are several companies who offer a 90/10 split and they have been around for a while. My ex-employer had a flat fee of $250 per loan or 10%, whichever you wanted to pick. Therefore, the statement that no company can survive on 10% is not quiet accurate. I am glad you keep mentioning McDonalds since one of my points is that McDonalds cannot fire its franchisees and the franchisee can protect his/her investment by a long-term contract and the right to sell it as a going concern. Furthermore, in the case of McDonalds the franchisee gets a lot more for his buck than a net branch manager gets from the parent company. McDonalds is a household brand and the corporation invests heavily in consumer advertising not to mention that the franchisee has an exclusive territory. McDonalds has a proven and well-established business model that virtually guarantees the success of every franchisee.
If a net branch offered all the above benefits then it is justified to use McDonalds or any other national/global franchise as a comparison. The reality is that most of the net branch companies are not household names. They do not spend any money on consumer advertising. They do not have a tested and proven business model to assure the success of every branch manager. They do not offer an exclusive territory. They do not offer a long- term commitment and they do not allow the manager to sell or assign his/her branch to a prospective buyer and to top it all, they want to own the branch managers’ client files, if he decides to break away from them. They treat the branch manager as an independent “entrepreneur” when it suits them (investing his own money and covering his own overhead, etc.) but at the same time they treat him as a low-level employee who can be fired “At will”, like you were treated by your previous employer. Now if this does not qualify as insane then I apologize for my incorrect analysis of the facts and I stand corrected.
Godfather | |
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Member
Member # 1220
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posted 01-27-2004 04:46 PM01-27-2004 04:46 PM
I am very impressed by all the questions and information that has been posed here. All net branching companies are different in their platform. I am with a company that charges $499. per file flat fee and if the loan is brokered outside it is a flat .25% of the loan amount if you are closing 75% of your loans in-house and .375% if it is less than 75%. We charge no other fees. Also once your loans close and fund you get your money!!!! Many net branch companies do not pay their branches until they sell the loan. If you have any questions feel free to call me or email me.
——————–
Nancy Oefinger
Natl. Dir of Business Development
Toll Free 877-504-8317
Cell 214-680-1512
nancyo@maverickmortgage.com
Posts: 177 | From: Frisco/Dallas Tx | Registered: Jan 2004 | |
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posted 01-27-2004 08:06 PM01-27-2004 08:06 PM
So, let me see if I understand this in simple terms. You want:
A 90/10 Split (90% to you)
3 Year employment contract
Anything else? Do you want the employer to sing your leases (office and equipment)? What about a salary? How about 1099 instead of W-2? You want to use your name instead of the company name on everything including the advertising? Is there anything else?
What do you really want Godfather? What can I do to help you. I understand you frustration. Unfortunately, do to our government, we are not allowed to “franchise” in the mortgage business. Do you really need territories, or do you think that you can be more competitive than the next guy. Even banks don’t give their people territories. Thank you for the apology, I know understand that you did not mean any offense.
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posted 01-28-2004 12:39 AM01-28-2004 12:39 AM
Steffen,
I assume you are asking these questions because your company may be able to offer something close to what I am looking for. I checked your web site and realized that your company is fairly new and you have applications pending in many states. When will you be in Maryland, VA and GA? Also, how is your pricing on banked loans, compared to GMAC, Provident Funding, Loan City and First Magnus? Are you signed up with HSBC for ARM products? How much are your junk fees (Underwriting, Doc Prep. Commitment fees, etc.) for banked loans? Do you offer contract processing?
I am going to do my best to describe the ideal arrangement:
I will have a three-year employment contract (with an option to renew for another three years) with a “Good Cause” clause for termination and the right to litigate disputes in court and the award of legal fees to the winning party.
The parent company opens a bank account with a national bank and I will be a signer on the account. All proceeds from closed loans will go in to the account.
All branch expenses (including Rent, Utilities, payroll, payroll taxes and the 10% split to the parent company) will be paid from the joint account and the balance will go to my management company, which will perform services such as marketing, lead generation, loan processing, staff training, etc. The parent company will pay the originators (including myself) a flat commission of $200 per loan on W2 basis, from the joint account. The management company will pay the balance of their pay and taxes based on individually negotiated pay plans. If there is a shortage, I will deposit my own funds as a loan and repay the loan once the funds are sufficient.
The management company will sign all leases and the parent company will be a co-signer on the leases. There will be a provision that if the management company defaults on the lease, I will be personally responsible.
Since my management company will purchase all the equipment and other assets of the branch, including the client lists, it will own all of the assets of the branch. I will have the right to sell my branch if I choose to as follows: As the branch manager I will have the right to hire a qualified operations manager for the remainder of my contract, who will run my branch for me and will buy shares in my management company as a purchase price for my branch. I will remain the branch manager on paper.
Depending on state laws, I may have to operate under your name or if it is legal, I may choose to operate under a DBA.
I do not need an exclusive territory but the parent company will agree not to hire any of my staff after they leave my branch. I do not want to train people and then let them open their own branch down the street.
This covers the main elements of the concept but the details will need to be worked out to make sure the deal meets all applicable laws and regulations.
Godfather |
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posted 01-28-2004 01:12 PM01-28-2004 01:12 PM
Hi Gf,
Sorry, can’t help you with the salary, and the signer on the account. If these two items are going to not make us happen, we are out and again, I wish you the best in finding someone that will give you that. You may want to look at OceanWest. We are not going to be moving in GA & NY any time in the near future.
These items open us up to too much, and we are not looking for any “corp” partners at this time. If you are interested in a “corp” branch, try looking up a state savings bank or a federaly charted savings bank.
Good Luck!
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posted 01-28-2004 02:43 PM01-28-2004 02:43 PM
I am confused. I never mentioned a salary nor did I mention a corporate partner. The W2 payment and the lease liabilty is a HUD requirement, not mine. If you can get away with paying all 1099 then I am fine with that. HUD requires you to be responsible and make all payments for branch overhead. The signer on the account is offered by Premier Mortgage and a couple of others. It makes it very easy to make all payments from the corporate account to comply with HUD.My main issues are the split and the fixed term contract with the right to sell my branch.
Steffen, I do not mean to talk down again but please run this by a couple of mortgage attorneys and then respond. THIS IS NOT A PARTNERSHIP. I am accepting all the liabilities for my branch. This arrangement allows both sides to reach their objectives - making money and having a fair contract. Why are you against the joint account? You want me to trust that you will pay me but you are not willing to trust that I will pay you?
Godfather |
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posted 01-28-2004 10:49 PM01-28-2004 10:49 PM
Gf,
I can do the employment contract with a stipulation for productivity. I cannot give you a “signer” authority on a “joint” account. Everything goes W-2 with no exception. HUD is moving away from 1009 and dba’s and we are following suit. All funds are covered by you out of closed loans. We will not “front” any money. We are not interested in being a “co-signer” on any lease. We will execute a sublease though. We will not hire anyone from you branch. Depending on your volume, at our choosing, we may not hire any other branches in your city. Does any of this sound intriguing? Some things we can work with some things we cannot. This is a no bullshit discussion. For any of you that think that we will give you an employment contract carte blanche, this is only offered to proven ,successful producers. Please contact me to discuss this opportunity directly, if you are interested in moving forward. I apologize for any confusion, and the “finality” of this posting. Again, something’s we are willing to work with, the others we are not willing to move on. There items stated above that we are not willing to compromise on are firm.
Let me know what you think. To continue this further, please call me at 616-293-7266.
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posted 01-30-2004 05:17 PM01-30-2004 05:17 PM
Steffen,
Thank you for your offer. I will contact you shortly to go over the details.
Any other company who may have an attractive deal can write to: dogwatch@operamail.com
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Godfather |
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