Net Branching for HUD-Insured Mortgages
HUD/FHA approved mortgagees are increasingly taking on separate mortgage companies as “net branches” to originate insured mortgages under the HUD Mortgagee Number. While net branching is against HUD regulations, some mortgagees have used it as a legitimate business strategy. As such, the net branching arrangements are widely advertised in trade publications. Despite these legal requirements, net branching continues to be widely practiced by mortgagees.
Important Points To Consider Before Choosing A Net Branch Organization
The advantages of net branches far outweigh its perceived disadvantages. In a net branch arrangement, the mother company expands its geographic reach without incurring costs. A net branch organization can explore new states and offer its products to consumers. In addition, a net branch allows larger companies to reach new customer demographics near their home offices. While it may be tempting to pay upfront fees, you’ll want to carefully assess each prospective net branching organization. The following are some important points to consider before choosing a net branch organization:
The reputation of the mortgage lending company. If you partner with the wrong mortgage lending company, it could harm your reputation with regulators, customers, and lenders. Make sure the mortgage lending company has a good reputation and has been around for a while. Size also matters. A larger company may attract more customers, but a smaller company might do better in some areas. But if size is not an issue, a smaller net branch company may be the best choice.