Part 2 – FHA Net Branch Opportunities – are they all the same?

In the last post we covered broker vs. lender for FHA loans.

Now let’s take a look at the next items on the list of important criteria you should consider if you are considering a net branch opportunity and intend to originate FHA loans.

  • FHA originated using the corporate address or the branches?
  • Corporate processing of FHA loans or at the branch?
  • Level of the company’s experience with FHA?

Many companies offering net branch programs will let a branch originate conventional mortgages from the branch but they will require the net branch to send all FHA transaction to the corporate office for processing.

Why is this a problem?

There are several important issues that make this a practice you should be concerned about.

Control – the net branch has lost local control of their loan. The processing and placement is now in the control of someone who at best you have had phone conversations with. The borrower, real estate agent , and closing agent are now working with someone else or they are calling you for progress updates and you do not know. The loan is out of your control.

Compliance – when you put your name on the 1003 with an address that is not your branch address you are putting false information on the document. Some companies have lost their ability to originate FHA loan for putting false information on a 1003. A company that uses the centralized call center approval from HUD for FHA loans is stating to HUD that all FHA originating is done from that office. If you take the application (originate the loan) locally and then sent it to the call center for processing you are violating HUD law and could lose your license.

A key point to remember when you are looking for a net branch opportunity is that not all companies have done their homework when it come to compliance laws.

Some of this is due to lack of experience and some is due to a lack of concern for the rules.

You should always investigate the net branch companies experience level. This is even more important when you are going to originate FHA loans.

HUD does not always move swiftly to stop problem companies but they do catch them. When they do it either results in large fines and or loss of license.

Do your homework. Make sure you are really partnering with a net branch company with a proven track record with HUD (FHA / VA) loans.

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