Scarcity of Time
Net branching is a simple distribution of responsibilities in the lending process. Typically, a highly qualified loan originator (or group of originators) would most wisely use their limited resources to concentrate on loan originations, leaving the other aspects of the process to the net branching parent company. Banking loans is plenty of work. Bankers can most efficiently manage their products, investors, pricing and operations when the production (origination) element is satisfied by professional branch partnerships. Therefore, the net branching company equally benefits in leaving the origination part of the business to their branches.

Limited Core Competencies
The production side of the business differs operationally from the banking side of the business. They are so different, in fact, that it is widely accepted as impossible to simultaneously be the efficient at both. Net branching allows specialized professionals with refined core competencies to work as partners, with each partner maximizing its efficiency and creating operational leverage to each party’s mutual benefit.

Outsourcing
Net branching is commonly compared to outsourcing, and the benefit is similar. But, more accurately, net branching is insourcing. Most often, becoming a net branch is the process of joining a lending company and taking advantage of that company’s operations, relationships and processes already in place rather than developing those time-consuming aspects of a successful lending channel on your own.

Capitalization
One of the most common aspirations of loan officers and brokers is to have their own independent ability to bank loans. However, requirements by investors for the individual to both demonstrate and directly risk a substantial personal net worth make banking loans impossible for most. Net branching allows a great level of autonomy in business development, strategy, marketing, staffing, and etc. without these restrictive high-level capitalization requirements.

Licensing
Each net branch company will have its own set of licensing requirements based on their compliance department’s interpretation of the various laws. Net branch candidates should consider a structure that is “too good to be true” to be exactly that. Licensing requirements vary from state to state, and each state’s process for completing the licensing can vary from nearly instant in notification states to many months in others. Candidates should have a reasonably developed marketing plan that identifies the specific states in which they would like to lend. The compliance departments of net branch providers should be glad to discuss that plan to help quantify the time and money that will be required to stay compliant.

Industry Knowledge
Most industries have well established trade groups to share ideas, successes, failures, strategies, etc. Joining such a group can cost thousands of dollars a year. Net branching establishes direct relationships with other mortgage originators to gain access to equivalent industry insights. Many net branch companies will arrange conference calls or regular meetings to facilitate this benefit at no cost to the branch.

Technology
Net branching, by definition, should provide the branch manager highly efficient tools and processes to maximize the financial return of the loan origination business. Most recently, technology has become the favorite and most useful of those tools. While many software systems in the past have provided help in individual parts of the cycle of operations in funding loans, there are now a few web-based systems that allow originators to work on one screen from registration to funding. Most systems process in one direction, in that the net branch manager can access offerings from investors loaded into the system. The more sophisticated systems are capable of processing in both directions in that they will measure demand for different product types for the investors by the activities logged by net branch managers. The reciprocal exchange of information allows both parties to keep their respective needs measured and met without interruption. To the benefit of the branch, these new systems quantify the demand for certain products and identify barriers in both underwriting guidelines and pricing.

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© 2006 Branch Navigator, Inc.