Sunday, September 09, 2007

Net Branching

by Tanta on 9/09/2007 07:33:00 AM

Having complained rather bitterly lately about the quality of a lot this stuff that passes for "financial advice columns" recently, I'm happy to have the opportunity to draw your attention to Michelle Singletary's column, "The Color of Money," in my hometown rag the Washington Post. Singletary's stuff is almost always useful, informed, and no-nonsense in attitude.

The opportunity involves a follow-up to my great sprawling post the other day on mortgage "orgination channels." Singletary writes about the dreadful "net branching" practice:

In a relatively new arrangement, some skirt the law by paying to become part of a "net branch" operation. Net-branching is similar to franchising. It allows individuals to operate their own mortgage loan origination branch using the mortgage-lending or broker license of the branching company. Individuals get assistance in running their businesses and gain access to a network of lenders. . . .

The authorities have stepped up their enforcement actions against operations that do business with unlicensed mortgage brokers, loan officers or loan originators. Most recently, 10 states took action against Apex Financial Group, also called Apex Mortgage. Apex was doing business with multiple unlicensed entities, leaving consumers unprotected, the states allege.

One person who worked with Apex was Frederick C. Lee Jr., founder of Financial Independence Group and other mortgage companies, whom I wrote about in an earlier column. Former insiders, with knowledge of the inner workings of Lee's multi-state mortgage operation, said he has assembled a network of people who arrange mortgages, sometimes through net-branching, even though the officers are not properly trained or in some cases licensed as required by the states.

In an interview, Lee denied that he or his company was involved in facilitating mortgage loans. "I'm not a mortgage guy," he said.

Yet loan documents I obtained suggest that Lee is acting as a mortgage broker. In one case, a $504,000 residential loan in Maryland lists North American Real Estate Services as the broker. Lee's cellphone number is listed as the originator's contact number. Lee is not licensed as a mortgage broker in Maryland.