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As the mortgage industry continues consolidating, net branching arrangements-a form of franchisingcould become a major way of delivering loans.
In the mid-1970s, when rock star Bruce Springsteen was on the verge of super-stardom, one music critic, after seeing the singer in concert, wrote: "I've just seen the future of rock 'n' roll, and his name is Bruce Springsteen."
Some in the mortgage banking industry feel the same hyperbolic enthusiasm might be appropriate for "net branching." If net branching sounds new to you, it should. Outside of a few articles in the trade press, little has been said about the concept, but as residential loan originations continue at their current over-heated pace, mortgage professionals will hear more about net branching arrangements in the years ahead-especially as the industry moves into a "whales and minnows" mode.
Net branching agreements can vary from company to company, though the overall concept is the same. In a nutshell, a "net branch" is a franchise agreement between an originator (franchisee) and a larger "mothership." It is very similar to John or Jane Q. Public buying a franchise from McDonald's or Burger King, though some net branching firms absolutely hate the comparison. "Please don't compare us to the fast food industry," begged one net branch executive interviewed for this article.
Still, the similarities between the two industries cannot be ignored. The end-product is different, but the legal agreement between supplier and storefront is the same. "One thing you have to keep in mind about net branching is that this a legal agreement-and that's all it is," observes Rourke O'Brien, president of Qpoint Home Mortgage Network, Bellevue, Wash. O'Brien also notes that it is called net branching because what the storefront lender has left after the loan is...