Important questions to ask when looking for a net branch company (part 2)

In the previous post we looked at the common questions everyone asks.

“What are your net branch fees and how long will it take to get approved?”

I speak to people everyday that are looking for a mortgage branch partnership. Many times the key questions are not asked.

The questions that I think are important to ask are:

  1. Is your company HUD approved? – Also do they use the corporate address for all FHA loans or does each branch get HUD authority? In today’s market you have to have FHA! It should be a flag if you are told all FHA goes through the corporate office. There are several reasons why this is a problem. One is “Neighborhood Watch”. A centralized operation exposes the corporate address to potential company wide loss of HUD license. One of the other problems is that the address on the 1003 should reflect your real location.
  2. If the company is HUD approved – how long have you been approved? – This is a very important question. A company that recently obtained their FHA approval is a novice in this area of lending. They are going to make errors that every novice makes. These errors could cost everyone in the company the ability to continue to close FHA loans.
  3. Has your company ever been suspended or fined by HUD? The company’s track record with HUD is a good indication of their compliance knowledge and ability to manage their company.
  4. Have any wholesale investors cut off or suspended your company in the last 24 months? – This is another great indicator of current and future problems. Suspensions or termination by wholesale investors tends to be viral. If it happened at one company it will happen at others. You do not want to work with a company that is losing wholesale investors due to audit and compliance errors.
  5. How many branches do you have active? – Many companies have hundreds of branch offices and many cannot service the number of offices they have. This leads to high branch turnover. High turnover in any sales organization leads to problems.
  6. Has your company had any buy back requests from investors? – How many buy back requests does it take to force a company to close their doors? Not many. If the average loan is $200,000 it only takes 5 to put the company $1,00,000.00 in debt.
  7. How long has your company been in business? You might be surprised at the answers you get to this one. You would assume that it takes years to establish a company and build a large footprint. My personal opinion is that an answer of less than 5 – 8 years is a big whopping red flag.
  8. How long has your company been involved in setting up branches? “Just a few years” would be a flag to me. A company with limited experience managing a large number of branch locations will go through a painful learning curve and take their branch managers along on the bumpy ride with them.

Is this every question you should ask? No – but this will give you most of the important ones. Each branch has a little different criteria that determine what is most important to that branch manager. The bottom line is do your homework. Remember the old saying “Look before you leap.”

I always welcome comments and questions.

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