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WHAT IS A "NET BRANCH OPPORTUNITY"?
In an industry where guideline compliance is so heavily scrutinized, it is vitally important to make sure that the net branch partner you choose is operating
in accordance to HUD guidelines.
We have observed many companies operating outside of HUD guidelines, and we caution anyone against partnering with a company who is either blatantly
disregarding HUD guidelines or who is just unaware of the rules.
a net branch arrangement is one wherein the branch manager's compensation is based upon the "net" profit of the branch.
Such an arrangement is, essentially, an alternative compensation program for the branch manager and is an acceptable branch arrangement if all other branch
requirements are met.
A Company is required to-
Other operating expenses that must be paid by the HUD/FHA approved mortgagee include, but are not limited to, equipment, furniture, office rent, and other
similar expenses incurred in operating a mortgage lending business.
Require the "employee" (branch) to issue a personal check to cover operating expenses if funds are not available from an operating account.
*(Source: HUD Mortgagee Letter 00-15)
*The key to comparing radically different levels of support lies in asking the right questions.
Create a spreadsheet and make notes about what each company offers for easy comparison later.
DO YOU OFFER A HIGH LEVEL OF NET BRANCH SUPPORT?
Since lack of support is the primary complaint of most net branch managers and originators, and the main reason people switch from company to company, it's
important to discover upfront how strong of a support system you are getting for your money.
You should be assigned to a responsive in-house support team and have constant access to a branch support hotline.
WHICH PAY PLAN IS BEST FOR ME?
Smoke and mirrors can make certain compensation packages look more attractive than others, so let's try to remove those advertising distractions and
marketing gymnastics to get to the bottom of this very important issue.
Do they benefit or profit when you are making money, or when you aren't? And are they motivated to support you? In order for you to be successful, your
interests must be perfectly aligned with those of your business partner.
Ask yourself these very important questions:
Does the Company Make More Money When You Do? Is the Company motivated to support branches that perform well? Does Additional Revenue give the company
incentive to ramp up critical support? Is the company motivated to help you stay in business? Do State Regulators Support the overall structure? Can the
Company grow without reducing critical overhead, such as training and support, and without passing administrative functions down to branch managers? Is the
Company motivated to help you reach your goals? Is the Company motivated to help you maximize your total revenue? Is it likely that the company will either
increase fees or cut commissions to support infrastructure? Does the company's profit increase when you sell another loan?
As you can see from the questions above, Flat Fee Per Month programs represent the worst overall value for loan originators and branch managers.
Furthermore, they are financially motivated to decrease critical support, training, and technology offerings, as these are viewed as expendable overhead.
In fact, as you produce more, you become a greater cost to them.
Most companies which utilize flat monthly fees often find that they have to increase their fees in order to keep up with rising overhead, which means even
less money to you.
How can the company really pay me 100%?
First, let's examine what "100%" really is.
On an average loan, the difference between 90% and 100% is just one junk fee of $355! Throw a few more junk fees in there, and now you're right back where
you started.
Balance Fee Fees Observed Inactivity Fee Set Up Fee Administrative Fee Closed File Fee Annual Conference Fee Fees Involved Countless Others.
find out where! Would you rather partner with a company who attempted to lure you in with an unrealistic commission split, or with one who put all the cards
on the table? Look for a company that is seeking long-term relationships - not short-term profits.
HOW WILL I BE PAID?
On Time! This is the most important attribute of a net branch opportunity, so it should be the most important to the company you choose.
Make sure the company hasn't missed any payrolls (big sign of trouble with net branch mortgage companies).
*Look for a net branch company that offers group health insurance (this is also a huge recruiting tool as well, as your future prospective employees may have
pre-existing conditions).
HOW CAN I TELL WHO HAS THE MOST COMPETITIVE PRICING AND THE BEST INTEREST RATES?
First, you must determine how the corporate entity makes its money.
This is good news for the company and bad news for you, as this structure yields more revenue to the company while putting you at a competitive disadvantage
since you are forced to sell their higher rates and lower yield spreads.
This is yet another area where the smoke and mirrors of 100% payout are meant to confuse you.
Look for a net mortgage branch company who is set up with almost every premium wholesale investor, and, hopefully one that receives premium pricing due to
their high volume.
WHICH INVESTORS/LENDERS ARE YOU SET UP WITH?
"More" in a list of investors isn't necessarily "better"! Look for a company that has a solid relationship with a few investors instead of a marginal
relationship with hundreds of investors.
CAN I ORIGINATE FHA, VA, Reverse, AND RURAL DEVELOPMENT LOANS?
With the sub-prime market in the tanks, FHA is back to being THE sub-prime loan.
Also, make sure they have some Reverse loan investors, and if needed, they should be able to show you how to originate these loans via unlimited government
loan training.
IS AN INTERNAL LENDING LINE MORE ADVANTAGEOUS TO ME?
Internal lending lines usually represent a lower value proposition for the branch managers and loan originators.
Generally, companies that have internal lines charge fees to discourage the use of an outside lender.
We recommend joining a company who is primarily broker-oriented.
IS IN-HOUSE PROCESSING BETTER THAN CENTRALIZED PROCESSING?
Strong in-house processing support is the key to a successful mortgage operation, and our experience has shown that a centralized or outsourced processing
center is the worst possible structure in maintaining a smoothly running mortgage shop due to de-specialized relationships, increased distance, and more
confined communications.
*This is why it is so important to choose a partner who places the highest value on compliance, and who keeps loan officers up to date on the ever changing
world of compliance.
The complexity of understanding state and federal guidelines for conforming in government products is a constantly moving target, not to mention the
communication and training necessary for all employees every time there is a change.
*Any net branching company which attempts to charge you upfront fees may be violating HUD guidelines, and therefore we recommend that you avoid any company
which asks you to pay money upfront (excluding license and general hiring fees such as background checks and credit report).
*Depending on your situation, it could be faster or slower.
You should receive everything you need from licensing to training manuals on how to submit loans to our investors.
*Although most companies claim to have a training program of some sort, or none at all, we encourage you to examine carefully exactly what a training program
will look like once you sign on.
Equally important is Mortgage 101 Training for Junior LO's, continuing education for senior LO's and managers, and training (both basic and advanced) for
processors and assistants.
WILL YOU HELP ME RECRUIT?
This is a core function of the branch manager, but a strong support system helps everyone achieve your goals together.
*Technology is an expensive offering and represents a major expense for the company.
Look for a partner with NO hidden fees and a wide range of technology offerings.
Partner with a net branch company who works closely with their third parties to help customize the tools and support that their partners receive.
WHAT ARE THE MINIMUM REQUIREMENTS FOR MY COMPUTER ON YOUR SYSTEM?
Due to most companies high technology system, there will probably be a few requirements for computers brought into the company IT infrastructure.
*Look for a company which offers a robust marketing library, complete with marketing campaigns, customizable flyers and brochures, bios, and valuable
information for customers.
Here are just a few examples of full campaigns and direct mail pieces that should already be designed to help you reach your target market.
*We strongly suggest you 'test drive' this option before making your decision.
Leads range anywhere from $0.
"Free leads" are usually bulk leads from the lowest end of the quality spectrum which have been sold many times over before they eventually reach you.
This means you would have to work more than 100 leads to generate a loan! This is NOT a wise investment of your time.
CAN I OPEN MORE THAN ONE BRANCH LOCATION?
Although most companies have a restriction against operating more than one net branch, if certain conditions are met, some companies will allow you to
continue to grow your business in order to give you unlimited profit potential.
WHO DETERMINES HOW MUCH TO PAY MY LOAN OFFICERS?
As the branch manager, you will most likely determine and set the compensation structure for your loan originators.
ARE THERE ANY PRODUCTION REQUIREMENTS? There should be none.
*Let's explore them.
Loss of autonomy - Those who were already in business for themselves may worry that joining a net branch operation would result in a loss of autonomy.
*By joining a strong net mortgage branch operation, you will be linked into what should be a respected name in all of the states in which it does business,
and the good name of your business will benefit by your association with theirs (this is why it's important to do your homework first).
*This allows you to remain in compliance with HUD guidelines as you fall under W-2 requirements, but also lets you keep as many write offs as possible.
*Net-Centric Air Traffic Management System Explained
" It will be clear from the definition that "net-centric" does not refer to a network as such.
Exchanges between members of the community are based not on cumbersome individual interfaces and point to point connections but a flexible network paradigm
that is never a hindrance to the evolution of the net-centric community.
The aim of a net-centric system is to make all data visible, available and usable, when needed and where needed, to accelerate and improve the decision
making process.
The net-centric environment is populated with all data on a "post and share before processing" basis enabling authorised users and applications to access
data without wait time for processing, exploitation and dissemination.
In the context of Air Traffic Management (ATM), the data to be provided is that concerning the state (past, present and future) of the ATM Network.
) while their own data also reaches the community on a level never previously achieved.
The more complete the information that is being shared and the more thorough its accessibility to the community involved, the higher the benefit potential.
Information sharing on a limited scale (as is the case in the mainly local information sharing hitherto implemented) results in a substantial improvement in
the quality of decisions but this is mainly local and improvements in the overall ATM Network are consequential rather than direct.
Since awareness of the state (past, present or future) of the ATM Network is not limited by lack of involvement of any part as such, finding out the likely
or actual consequences of decisions is facilitated, providing an important feed-back loop that further improves the quality of decisions on all levels.
Net-centricity is a feature of the complete ATM system design, providing different benefits to different aspects of air traffic management operations.
The concept of services
In traditional system design, information technology (IT) was often driving developments and the functionality being provided in some cases became a
limitation on the business it was meant to support.
Aligning IT to the business rather than the other way round improves business agility and efficiency.
" This refers to the ATM services required and not the underlying (technical) supporting services and physical assets that need to be deployed.
Well designed business services must exhibit a number of characteristics that describe the service being offered sufficiently well for the service consumer
(s) to clearly understand the service and hence to want to make use them.
There are several business processes that can be identified in the context of air traffic management.
g.
These and all other business processes require specific services to progress and complete in accordance with the business objectives of the process owner.
are just a few examples of the business services that need to be provided in order to achieve the objective, in this case a timely and safe departure.
The services so defined will then set the requirements for the underlying IT support.
While from an economic perspective integration may indeed mean all of the above, net-centric integration is about empowering better decision making through
the creation of the complex, networked community of people, devices, information and services that generate benefits to all members of the community without
necessarily changing the mapping (nature, number and location) of the community members.
In the net-centric context it is not integration as such that changes the enterprise landscape.
The end-user aspects of net-centric operations
One of the less understood aspects of traditional decision making is that it is not really possible to realise when decisions are based on less then full
and/or correct information.
At the same time, the effects of less than good decisions may not be immediately visible.
So, while everyone may be doing their very best, the result may still be far short of the quality that would be otherwise achievable.
The decision makers will notice the expanded possibilities and ultimately the success of the enterprise will also improve in a visible way.
In the more restricted environment, end-users will have been asking for more information and tools to make using data easier.
The shared environment under net-centric operations brings all the data anyone may ever wish to have.
In a way a well implemented net-centric system is transparent to the end-users.
Information management, that is part of the net-centric environment, takes care of finding the information needed and also its quality assurance.
In the ATM context, vastly improved controller decision making tools, safety nets and trajectory calculation are only a few examples of the possible
benefits.
The net-centric and service oriented future ATM environment possesses a number of aspects which by themselves provide powerful drivers for proper
regulation.
The items of particular relevance are summarised below:
Wide scope of information contributors - The information needs of the future ATM Network, including the scope of that information, will result in a
multitude of new information sources/contributors and/or new types of information being obtained from various information sources.
Once the net-centric ATM Network is realised and aircraft become nodes on the network, a completely new regulatory-target regime is created in the form of
the integrated air/ground ATM elements.
There are however legitimate requirements for protecting some information in one or more of several ways, including de-identification of the source,
limiting access, etc.
Specific military usage (not all of which involves aircraft operations) as well as various civilian projects and missions employ information that is even
more sensitive than the normal business or security sensitive information categories.
This aspect poses a specific challenge since not only is the information possibly in a military/State security domain but the regulatory domains may also be
nested in different organisations that need to be brought together for and under the SWIM umbrella.
This does not mean the disappearance of voice communications on the end-user level.
Hence a convergence of the regulatory regimes for voice and data communications will be inevitable.
The net-centric approach of the new ATM environment will create large islands of shared information which must however be able to interoperate between each
other as well as with legacy environments, constituting a new, global need for proper regulatory regimes.
The dedicated "pipe" in air/ground communications is certainly a reality today but the same cannot be said of the ground-ground communications links.
The drivers behind this change are obviously cost effectiveness considerations.
Since such demands will always fetch a premium price, it stands to reason that combining the operational and passenger connectivity needs onto a single
air/ground pipe could be commercially attractive.
The value of information - Information is a valuable commodity and in the competitive environment of aviation this commodity is of course sought after by
many partners, including others than only aircraft operators or airports.
Cost effectiveness - Although not always thought of as a driver for regulation, a proper regulatory environment will favour cost-effective, user oriented
solutions.
This has implications in the construction and approval of training syllabuses, examination fulfilment criteria as well as the qualification requirements.
Standardisation - System wide sharing of information in a net-centric environment requires that the data be the subject of proper standardisation on all
levels.
The development and use of the necessary standards can only be realised under a proper regulatory regime.
Trying to apply traditional methods of regulation without taking the new realities into account is counter productive and must be avoided.
The aspects of regulation to be considered include:
Safety o Security o Information interoperability o Service level interoperability o Physical interoperability o Economics In terms of who should be
regulated, thought should be given to at least:
The State as data provider o Licensed providers of services, including network services o Licensed data sources o Licensed providers of end-user
applications o User credentials and trusted users
It is important to answer also the question: who should be the regulator? This must be agreed in terms of:
International rules and global oversight o Licensing rules and global oversight The types of regulatory activities that need to be put in place concern
mainly compliance verification and certification; quality maintenance; and enforcement and penalties.
The technical implications of net-centric operations
On the conceptual level, net-centric operations mean the sharing of superior quality information as part of a community and acting on that information to
improve decisions for the benefit of the individual as well as for the network (the networked community).
This technical infrastructure is often thought of as a network with the required band-width and reliability; it is true that the replacement of the one-to-
one connections that characterise legacy systems with the many-to-many relationships of the net-centric environment does require a powerful network that
fully meets all the quality requirements, but there is much more to net-centricity than this.
brings in a layer of technical requirements that sit higher than the network as such.
These are often referred to as intelligent end-user applications.
End-users may be pilots, air traffic controllers, flight dispatchers, handling agents or any other person or system with a need for the shared information.
This then may be a synthetic display of the airport on an EFB, a trajectory on a what-if tool display or a list of arrivals for the taxi company and so on.
This scalability enables the end-user applications to run on different networked devices from simple PDAs through airlines systems to on-board equipment.
As an example, the integrity of the data used to build a trajectory and the quality of the application used to manipulate/interact with the trajectory will
depend on the use that will be made of the trajectory and not per se on whether the application is running on the ground or in an aircraft.
Net-centricity - the essence of the future
The net-centric approach to system design is not a silver bullet.
It is the end-user applications built to work in the net-centric environment that come closest to being the silver bullets.
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