Feb 23rd

2010

How to Start a Mortgage Company

It’s amazing the number of new mortgage net branch companies that pop up every year only to close their doors a year or two later. Failure to make payroll or a government shut down is typically the cause. Why does this cycle exist and how can you avoid it?

A mortgage branch company is not an easy business to start, manage or operate. To some, it sounds like a quick way to get rich. Hire a lot of loan officers, make a couple hundred dollars off each loan, and retire in a couple years. If only it was so easy.

So, what will you need to start your mortgage company? You will need at least $100k per month just to cover corporate salaries. Don’t forget about the phone lines, office space, insurance, frivolous lawsuits, audits, software, and wide array of other expenses. It’s best to plan on a minimum of $200k monthly in expenses just to get started. Also, all of those loan officers and loans to fund need lots of attention.

Government regulations – you need a library of books just to keep up with every governing agency. Multiple state and federal agencies all have rules on how you must operate your mortgage business. To make things even more complicated, these rules are often confusing, not clearly written, and have a habit of changing without much notice or any explanation.

Investor guidelines can sometimes be a moving target. Have you ever read a correspondent or broker agreement? Notice who takes all of the responsibility and risk? If a borrower fails to make the first few loan payments, even when the reason is beyond your control such as a job loss or illness, guess who owns that loan now? The mortgage branch company. Not only does the mortgage branch company get to underwrite, close, and fund loans, they also involuntarily become real estate investors and loan servicers.

In order to operate a mortgage branch company, you must have experience in doing so. Most of the mortgage companies that start every year are done so by persons with mortgage industry experience, but no real experience in actually running a mortgage branch operation. They are blind to the realities that exist and are quickly overcome by financial problems and government headaches.

An often overlooked component in a successful mortgage company is the commitment and passion needed to assist the mortgage branches by the corporate staff. The dynamics between the corporate staff and loan officers is uniquely personal. Excellent customer service to the mortgage retail branches requires specialized professionals with a broad understanding of the mortgage business. Mortgage retail branches depend on this vital link to the corporate office to succeed. When the branches succeed, the company succeeds.

When looking at mortgage branch companies, find out how long they have actually operated in such a capacity. What kind of staff do they have in place? Does the CEO also act as the licensing specialist? Ask for a corporate office employee roster with job titles. If you want to be a guinea pig with a mortgage branch company that only has a couple years or less of experience, be prepared for the day when the corporate office phones are no longer answered and your paycheck bounces.

Southwest Funding is one of the oldest retail mortgage branch companies. Originally started as a single retail operation in 1993, the company quickly expanded and added branch locations throughout Texas. In 2004, the company amended its name from Texas Residential Mortgage to Southwest Funding as mortgage branch offices outside of Texas started opening. HUD approved since 1996, Southwest Funding has the proven track record and experience to be your mortgage branch provider.