FHA Net Branch / FHA Affiliate Branch Tips
Many people who are unable to meet the net worth requirements to get FHA approval are making a move to Net Branching, also called Affiliate Branching. It is much faster than getting an FHA Approval, an existing FHA Approved Broker/Lender can have you up and running as a branch very quickly and in some cases at a fairly small cost.
You have two roads to go down when you decide to become a branch of someone else, Broker or Banker. Some companies claim to do both, but more and more lenders are putting restrictions on allowing FHA Lenders to broker them loans. They are realizing that when another banker decides to broker a loan, it usually isn’t a very good one. Keep this in mind, if prefer to broker then go with a FHA Branching Company that CANNOT underwrite and close their own FHA Loans, if you want to go for the banker side then you will need one that can. We’ll look at both types of FHA Lenders below.
Being a Branch of an FHA Approved Broker
As a broker you send your FHA Loans to any wholesale lender you want. If one wholesale lender is running slow in underwriting, you can send to another one. If one lender changes a guideline you don’t like you can just send your loans to another one.
The downside to being a branch of a broker is the pricing. You have too many hands in the pie, the branching company who you work for will need to make money on every loan and the wholesale lender you send the loan to will need to make money on each loan.
Being a Branch of an FHA Approved Lender
When you are a branch of an FHA Approved lender, you lose the options of brokering. There are some lenders who will let another lender broker to them, but no always. This is also changing rapidly because lenders are seeing the loans brokered from other lenders are usually lower quality. The lender you work for becomes your primary place to have your loans underwritten and closed. This means if the company you work for changes guidelines, or has slow underwriting time, there is not much you can do about it. You are locked into the lender you work for.
The positive side is pricing - in most cases. The company just earns the same amount per loan that any wholesale lender would and you are not charged any additional fees. The lender offers you their normal wholesale pricing in return for the business, just like they would a broker.
When I was a net branch I always went with a smaller Lender and made sure I had a good relationship with the owners/executives. My company does not allow any net branching, I don’t really believe in the concept from the lender side. This may sound hypocritical since I was a branch once, but with the current state of the market we are only hiring tradition branch managers so we can maintain a higher level of control over our branches and the quality of our loans.