Net branches are the joint operations of one larger loan office usually connected to another through a common administrator. A net branch is also called a minor outpost of a larger established lending office under the broader supervision and authority of the parent company. In the United States the largest number of Net branches is found in the Southern tier states of Texas, Florida and Arizona. Net branches in Canada have grown in popularity in Net Branch recent years, particularly in Ontario and British Columbia.
The Net Branching concept has its roots in the original network marketing concept of network marketing companies. Net branching can be thought of as providing credit support or loans to people with no or bad credit. Net branching was meant to provide fast cash, low-cost loans to small business owners. In most cases, Net branches are a direct link from one lending office to another, thereby eliminating the need for an applicant to apply for funding from various lenders separately.
The Net Branches concept was used in mortgage companies initially. Under this system, when a homeowner applied for a mortgage from a lender, the lender would send a request to the Net Branch that it handle the loan request. The Net Branch then contacted the lenders on behalf of the homeowner. This allowed the lenders to approve the loan request in a quicker time frame than it would take to make an application individually to various lenders.
Net branches were first introduced by Fannie Mae in the late 1970’s as an alternative to the traditional appraisal process used by lenders. Under the flat fee system, homeowners could submit their request to the lender online and receive approval and a quote directly from the lender. It provided a significant cost savings for both the homeowner and the lender. Because of the Net Branch concept, mortgage companies began to introduce Net Branches throughout the country.
The Net Branch system provided a significant speed improvement to the loan process. When a homeowner requested funds through the Net Branch, the lender could send the request to all lenders, and the lender would send a response to the request in a quicker amount of time than it could take using the traditional method. The Net Branch was also beneficial because borrowers did not have to go through the appraisal process with each lender individually. With the Net Branch, if a borrower had a poor credit score, he or she could still be approved for financing. Furthermore, Net Branches provided lenders with a complete listing of all of the applicants that had applied for a particular loan. As mentioned earlier, the flat fee structure made it a very efficient and time-saving system for both the lender and the borrower.
Unfortunately, the Net Branch system did have some negative aspects. For example, when a Net Branch handled an appraisals request from an applicant who had poor credit, the Net Branch sent the request to all of the lender’s nationwide branches. As a result, sometimes the Net Branch sent the requested loan documents to the wrong location, causing the application to be sent to the wrong lender. Furthermore, because all of the lender’s nationwide branches were associated with the same Net Branch, if an application was sent to one branch office, it could cause all of the lender’s other branches to receive the application.