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Types of Mortgage Net Branch P & L Business Model
The mortgage industry is extremely competitive. Everything that can deter an NMLS-licensed mortgage loan originator from creating a book of business and developing a preferred third-party referral partner network from becoming successful is very difficult, BUT NOT impossible. I own, operate, and managed an independent mortgage net branch since 2015. The job of a full-time NMLS-licensed mortgage loan originator is tough enough and extremely competitive. However, if you are an independent mortgage net branch P and P owner under a larger mortgage broker or mortgage lender, it can be a challenging task where you need to realize the importance of every aspect of not just the mortgage loan origination process, which includes your support, operations, and licensed staff, in-house wage earners, third-party vendors, costs of running a remote or a brick and mortar branch, how the mortgage net branch markets to generate leads (whether it is buying leads, working with preferred referral partners, outreach, or using one or more of the many digital media marketing platforms). Marketing to attract consumers is the most important part of any business. No matter what type of business you are running, without customers, you will not generate revenue. Without generating revenues, you cannot pay your bills, expenses, and in-house and/or third-party business associates. There have been many changes on how mortgage companies operate and how they have restructured their compensation models in the past several years. Everyone knows how it goes right? One company has a brilliant idea on what and how they offer a MLO compensation and benefit program, and in no time you will see a bunch of mortgage company competitors all jump in to a similar business and compensation platform. For example, the mortgage net branch P and L model is not new and has been around for well over a decade. However, it was the mortgage bankers (direct lenders) that offered independent mortgage net branch business platforms. The targeted group of mortgage net branch were independent mortgage broker shops, high producing mortgage loan originators, MLOs who were team leaders at mortgage companies, and MLOs who had the drive, energy, and entreprenuer who wanted to take their mortgage loan originator to the next level. Once a larger mortgage lender started offering mortgage net branch opportunities, more and more companies from FDIC banks, to small, medium sized, and large direct lenders started aggressively offering similar Mortgage Net Branch P and L career opportunities. Remember, one thing. There is no such thing as free in the mortgage industry. Whether you are a consumer, borrower, loan officer, or a third-party professional inside or outside of the mortgage industry, the lenders, regulators, wholesale investors, government agencies, will nickel and dime you. There is a lot of money in the mortgage industry. When time are great such as with low rates, little to no inflation, a stable strong housing market, and a strong and stable economy, you can make substantial money in the mortgage and real estate industries. However, on the flipside, you can lose your ass off, lose your license, and shut down your doors. It is no secret that mortgage companies (direct mortgage lenders) were like hungry sharks trying to recruit mortgage loan officers, tam leads, and branch managers to their mortgage companies. What happened is the mortgage bankers offered they had the lowest rates and the best MLO compensation plan over the competition. They were like sharks. However, they were deceitful and liars. What happened imortgage companies were manipulating pricing on the back end. As direct lenders, lenders can adjust the back end fees and yield spread which reflects on the pricing of mortgage rates. If you have a lower back end compensation, that means the borrower gets a lower rate. It was an epidemic where every lender down the street and on the internet were suckering MLOs with doctored artificial rates and comp plans. Once you got sucked in to a mortgage company as a MLO or independent net mortgage branch, the first few months it was paradise. However, as time passed, you can obviously see rates were creeping up and your compensation as as MLO was plummeting. Eventually, it came to a point where direct lenders were pricing loans even to their best client’s at higher rates PLUS points over their competition. Even though the mortgage industry was extremely regulated, it did not stop greed. I remember, I lowered my compensation plan for my mortgage loan originators and myself when I was operating a net mortgage branch, however, I still had to charge discount points and my rates were substantially higher than a typical mom and pop mortgage broker. Mortgage Brokers generally have lower rates than mortgage bankers because the maximum compensation they can charge is a 2.75% yiield spread premium. Mortgage Bankers cannot survive with a 2.75% YSP cap because direct lenders have substantial higher overhead than mortgage brokers. Then in 2017, Mike Kortas and Mat Grella came up with a genius idea of creating and launhing NEXA Mortgage. Both Kortas and Grella were on a national campaign that Brokers were better. They came up withh a phenomenal marketing slogan that NEXA’s mission is to pay MLOs 100% and offer the lowest rate in the market with a network of 300 wholesale lenders and licensed in most of the 50 states. Due to the aggressive campaign and the RaRa of upbeating their MLOs, NEXA grew to close to 4,000 MLOs today. NEXA is still touting they have the best compensation in the mortgage industry and no other mortgage broker can beat them.
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