About the Author
Brian Mahany and his firm Mahany & Ertl represent mortgage company employees who have been denied commissions or reimbursement and also represent whistleblowers in claims brought on behalf of the U.S. government. Presently they are partnered with HUD in the largest federal false claims act case in the nation against a mortgage company – the government’s $2.4 billion claim against Allied Home Mortgage. Brian welcomes inquiries at (414) 704-6731 (direct) or by email at brian@mahanyertl.com.
Mortgage net branches – they are everywhere. If set up properly they help people get into the mortgage business with low start up costs. The benefits include access to a national network, more products and more lending lines. Customers get better rates while independents can enter the business without millions in start up costs.
There is a dark side, however.
HUD and the Federal Housing Administration (FHA) have strict rules designed to insure that loans guaranteed by taxpayers are good loans. Taxpayers shouldn’t be asked to shoulder the toxic debt created by unscrupulous mortgage companies. To insure that the mortgage company itself has some “skin in the game,” they must insure that their agents are well supervised and not shouldering the costs of the branch.
It’s the mortgage company, not the branch manager of the net branch, that must bear certain branch costs such as rent. If the costs are simply forced down on branch managers and employees there is a greatly increased risk that these folks will cut corners in order to remain profitable.
When lenders force branch managers to absorb rent, equipment leases and the like, the risks increase for the branch managers, branch employees and borrowers.
We have prepared this checklist of things to watch for, although the list is certainly not exhaustive.
Signs and Symptoms for Branch Managers:
- Ability or willingness of lender/broker to withhold payment of commissions for “convenience” or tax purposes;
- Operating expenses of any kind being “reimbursed”;
- Advance payment for anything (build out, security deposit on lease, etc).
- Broker lender requiring branch to pay costs of lawsuits or attorney fees for mortgage related problems;
- “Up charging” of any kind (lender refusal to provide support services at cost); and
- Any kind of sublease for an office or branch.
If you know of a violation of HUD rules, you may have a great case under the federal False Claims Act. Branch managers and compliance employees are ideally suited to become whistleblowers in false claim suits. With the whistleblower receiving up to 15 to 30% of whatever monies are recovered.
Did you write this 10 years ago?
Thanks for the comment Steve. I wish we wrote this 10 years ago – it might have saved a lot of money for many former branch employees. The whistleblower suits we handle are gratifying but not nearly as much as helping recover money for former branch employees and managers that were left holding the bag – an empty bag.
Brian
I have been in the mortgage business for 30 yrs. I don’t know of any company that has NET Branches that don’t just sublease the office from the manager on a month to month basis.
I know it is not right, but what company is going to sign a 3-5 yr lease for a Net Branch that can be gone tomorrow?
Of the thirty Net Branches that I am aware of, off the top of my head, do you know how many have the sublease arrangement?
Let me think? oh yea, 30.
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