Asking the Right Questions Determines Your Success Before mortgage professionals start the process of evaluating branching companies, it is vital they perform due diligence to ensure they select a credible, stable, transparent company that will have longevity. Due to shifts in the industry, there has been an influx of new branching businesses that grew from other sectors. Many principals at these companies have backgrounds other than retail branching. This creates challenges as they are often unable to understand how to best support branches or loan originators. As the decision to affiliate with a branching company has the potential to shape one’s career, it is important to research, qualify and vet as thoroughly as possible. The selection of a top branching company will allow success for branch managers and employees. The Right Questions, To Get the Real Answers Once a business owner or mortgage professional decides that they are ready to become affiliated for the first time, or to change affiliations, there are questions that are important to ask the potential employer. The first question to ask is “how long have you been in business?” It is important to have a deep understanding of not only how long the company has been around, but to have a clear picture of what type of business they have conducted over the years. For example, has the company always focused on retail branching or have they transformed and reinvented their focus recently? The longer they have been in the branching business, the better equipped they are to support their individual branches. Knowing how long the company has been in the branching business indicates how familiar they are with helping new branches transition into their organization, what support their branches need, the training they can offer to branch managers and staff and how to help support a successful transition. It is important to understand the company’s goals for the future, including how they will navigate regulatory reform. This will provide insight on where they are headed and the viability of their future survival and success. Research their mission and decision making processes, then evaluate how these have affected the company and how future decisions could impact your individual branch. Another important question to ask is “do the principals of the company have a mortgage origination background?” Listen to their response and attempt to identify the orientation of the company. For example, was the company leadership team formed by individuals that used to work originating loans, or are they currently producing loans? If the company does not understand today’s challenges at the branch level, it becomes difficult for them to relate to the day-to-day issues at the branch level. Ideally principals are in touch with what happens at the branch level and can make changes based on those experiences. If they have worked their way through the business, they understand the production side and the tasks of branch managers and loan officers. This helps them to better relate to individual branches, answer questions and give branches the support they need on a daily basis. Retail branching requires a unique set of additional staff and knowledge. Human Resources must be able to seamlessly integrate new employees and branches and easily transition benefits. Furthermore, licensing procedures for the branch and its staff must be clear. Most importantly for your customers, the support and loan processing capabilities must be available from day one. It is vital for success to affiliate with a company that understands and in turn will best support branches. Are they Transparent? How have they been able to navigate the changes in the industry over the last five or more years? How strong of company are they? It is crucial to know that a company has adequate net worth and that they are profitable. As important, do they generate timely, accurate P & L’s for their branches? An additional investigative tactic is to ask for a complete list of branch managers, then randomly select a few to call and interview. Calling these managers at random ensures that they have not been coached for your call and allows you to capture candid, unrehearsed, first-hand testimonials from their experience with the retail branching company. Partners With whom does the company partner? What services do those partners provide? How long have they been partners with each company? Every company has a variety of other companies they work with that are integral to the products and services they provide. Retail branching companies are no different. Long lasting partnerships mean that both have found the relationship to be beneficial and it often means better service. Knowing how much warehouse capacity they have and who they sell their loans to is crucial to the success of your branch. It is essential that they demonstrate openness when it comes to credit facilities and all partners throughout the process. Industry Changes With new regulations being imposed across the mortgage industry it is important to ask questions about how the company has dealt with previous changes, and how it plans to deal with upcoming changes. Knowing how they have reacted to previous industry changes should give you some insight as to how they will make changes in the future. One looming regulatory issue is compensation reform. With this reform scheduled to be implemented across the industry in April 2011, ask how is the company planning on dealing with this huge change? What will their new compensation criteria be? There is no denying that these changes will be profound, but it is clear that successful loan officers and branch managers will still be rewarded. The model may change to compensate loan originators based on the volume and quality of the loans, instead of revenue. Transition Planning Once you have talked with the branching company and think you are ready to make your final decision, there is one more set of questions to ask. What type of planning and support does the retail branching company offer? Chances are it will take time to build the relationships with the right people at the branching company. What are their policies to help you meet those people? How quickly can they get you and your staff licensed? What type of training do they offer to get you and your staff familiar with new computer systems and processes? Is the branching company willing to bear the cost of the transition? HUD rules regulate that a company may not ask for a start up deposit, so make sure you are familiar with these. When a branch manager makes the decision to move to a retail branching company there is an essential paradigm shift that takes place. This shift is often accompanied by a turbulent first 30 to 60 days, but by having a plan in place to address the key questions above, much of the turbulence can be resolved before it starts. If there are issues that arise having a plan in place to get answers addressed quickly and correctly will be important. Overall, having a transition plan in place helps to make sure that all parties involved stay on a profitable track. When entering into this partnership remember that both companies are making the transition together. Individuals should take the time to do their research, to ask questions and then to make a plan for the transition. Doing this research and having a series of comprehensive, transparent meetings before a transition is finalized will help reduce problems in the future. Knowing the appropriate research has been done will give the peace of mind that you have made the right decision for you and your staff. Ultimately, this means that the relationship will be mutually beneficial for both you and the retail branching company. By Kurt Reisig, CEO of American Pacific Mortgage Reisig is a licensed originator, the owner of a successful originating branch; a business coach and a speaker at various mortgage industry events. Reisig is the founder and the current CEO of a leading retail branching mortgage banking firm. More information is available on American Pacific Mortgage Corporation and its “Open Platform Retail Branching” at www.apmortgage.com. Comments or questions for Mr. Reisig can be sent to [email protected].