Technology For The Net Branch ; Regulatory pressures may have changed how they classify themselves but the technological challenges they face remain the same.

Whether you call them net branches, affiliate branches, franchises or something else, lenders still have to make sure that the data flows smoothly back to the home office. The net branch structure has proven itself to be among the fastest ways to build a network of distributed mortgage lending branches. In its simplest form, a net branch puts a branch manager in a position to act as both an owner and an employee. Free of the responsibilities associated with human resources, marketing, licensing and compliance, the manager works to maximize origination volume while minimizing branch expenses. In return, he is usually offered some form of bonus compensation based on the performance of the branch.

Lately, the world of net branch has been impacted by federal regulators. As attorney Phil Schulman, a partner at Kirkpatrick and Lockhart LLP in Washington, points out, FHA changed the rules of net branch when it issued mortgagee letter 00-15. That letter changed the way net branch operators treated their branches, employees and expenses, but it didn't change the basic structure or technological needs of an operation of this kind.

The Key to Success

"Net branches, by nature, have a goal to grow very quickly," says J.P. Kelly, co-founder and chief executive of West Palm Beach, Florida-based Beanstalk Networks, the makers of Mortgage Connect. Net branch operators who can bring new branches into the fold quickly and get them producing will find success. But there are dangers in moving too quickly.

"That (growth) can happen haphazardly, which can put them in danger in an environment where compliance and document issues are becoming more and more strict," Mr. Kelly points out.

Mortgage Connect is an ASP-based software service that provides a network between distributed branches along with a centralized database. The company acts as a de facto IT department for smaller firms and makes Citrix technology available to them for the low- bandwidth transmission of the applications they need for a monthly fee.

Firms like Beanstalk offer net branch operators the opportunity to quickly put new branches online, and then cut them off cleanly if the company chooses to part ways down the road. Beanstalk can have a new branch up in a matter of hours, offering a package of software...