A net branch is an office branch for mortgage brokers that is supported by a lender.
Such operations are meant to make brokers employee of the lender, yet retain their independence position of brokers.
At least that what it theoretically means.
A net branch should not be confused with a correspondent lender.
In practice, a lot of questions can arise including:
- How do we know brokers are not bias towards the supporting lender’s loans?
- How can brokers be objective when they have a paymaster in the form of a lender?
- Are the loan officers in these net branches brokers or bankers?
However, net branches have some advantages for brokers.
Firstly, there is no requirement for brokers to disclose yield spread premiums which can often cause a borrower’s jaw to drop.
Then, with the resources and licenses of a lender, brokers have more access to more loans nationwide.
That’s not the mention the streamlining of processes as back-end support.
Thirdly, brokers who have worked for brokerages for a long time and wish to start their own brokerage will find this method a low-cost way to startup.
A seasoned broker will find this arrangement favorable as all he has to concentrate on is originating loans. While the expertise, systems, and resources at the back end provides administrative support.
However, it’s not going to be easy convincing a lender to setup a net branch for a broker.