Net Branch – definition.

What is a Net Branch?

There are conflicting definitions of what a net branch is.

HUD, various state legislative bodies, and the mortgage industry do not always agree on what a net branch is.

The big differences seem to be between the generic use of the term that is used throughout the mortgage industry and legislative bodies that have passed laws that at first glance seem to be against a net branch operation.

The generic term for net branch usually means that a branch manager’s compensation is determined by the (Net Profit) profitability of the branch office that they are managing. States have no law against this and HUD has specifically stated that this is a legitimate form of compensation.

The legislative definition that some States, and HUD have focused on details situations that are not legal.

  • Paying originators and others working in the branch as 1099 contractors¬† instead of as W-2 employees of the company.
  • The branch maintaining it’s own set of books and bank accounts instead of all monies being managed and dispersed by the parent company.
  • Branch personnel and activities not being managed and supervised by the corporate office.
  • Profits or income from the branch paid to an LLC or other entity instead of all compensation being paid by W-2 to to company employees.

The majority of companies that offer branch management opportunities today use the term “Net Branch” in the generic meaning and most follow all state and federal rules of operation.

For more information on our Net Branch Opportunity visit our FAQ or Contact Us pages.

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