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photo, Jim Marks
For mortgage brokers, net branching (some proponents call it alternative compensation structures for managers of retail branches) remains an alternative to consider in uncertain times. There are a number of factors that net branching supporters cite to spur growth in this segment. Some of those, such as regulatory risk, are transitory. The biggest factor remains reform of the Real Estate Settlement Procedures Act, especially as it pertains to disclosures and yield-spread premiums.
The other major transitory factor is interest rates. Rising rates impact volume, especially for those who have depending on refinancings for the bulk of their business for the past few years. But now changes in the marketplace are also having an impact on the less-rate sensitive home purchase business as well.
Others are permanent, with mortgage and non-mortgage business- related factors. Many mortgage brokers are great originators, but lacking in the skills needed (payroll, accounting, bill paying) to run a business successfully. Furthermore, small businesses often cannot compete with larger firms in terms of benefits, especially retirement and health.
Mortgage-related factors include education and training of employees and product availability.
While there is growth among net branching companies, it still remains just a small part of a fragmented industry.
Daniel Jacobs, the chief executive of 1st Metropolitan Mortgage, Charlotte, N.C., said the company has seen a little bit of a pickup in its recruiting efforts. Not only has it approved more branch manager applications, "we've actually seen an increase in the experience level of the manager applicants, which is nice for us.
"But before that, we had seen a little bit of a dip. Earlier in the year we saw applications drop some and recently seen them pick up some.
"How much has to do with market conditions, it is hard to say. We definitely see a certain seasonality to branch manager applications, and sometimes we can attribute differences to certain market conditions. I'm not certain we have enough data to support any one theory right now, but we're thankful we are appealing to some well- experienced branch managers that want to be Metro branches," he said.
There are a number of trends involved, including an increase in the regulatory burden on mortgage originators, a tightening of margins for...