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Net Branches - DFI Issues A Reminder

You say “net branch” but Washington law says “branch office.”

In June the Department of Financial Institutions issued a statement regarding the concept of “Net Branches.” It was a reminder to the industry that the Washington Mortgage Broker Practices Act, chapter 19.146 RCW does not recognize the “net branch” concept that many brokers refer to when talking about their branches. Washington mortgage law allows for branches and places a single standard on all branch mortgage offices.

Washington branch mortgage offices must receive and maintain a license. There are standards that must be met before opening a branch. For example, if a main office of a mortgage broker is not in good standing with the Department of Financial Institutions, a branch license application may be denied or delayed until the company clears up outstanding issues. Branch offices are not independent of the main licensed mortgage broker office; they exist under the main licensed mortgage broker office. A branch may use a “doing business as” name when conducting business but that use must also include identification of the main office by either the main office license number or name. Branches must be overseen by the company’s designated broker although he or she need not work in the branch. The designated broker is responsible for all company activity, including branch activities. See WAC 208-660-300 and WAC 208-660-250 (5).

Branch offices cannot independently hire employees and independent contractors. These workers must be hired by or engaged to work with the licensed mortgage broker. Again, this is because the branch office and its activity exist under the license, supervision, and bond of the licensed mortgage broker.

If you are considering opening a branch office or if you are going to be a branch of a licensed mortgage broker, make it a point to review the notice on branches. Also read WAC 208-660-195 (3); 208-660-180 (9); 208-660-155 (3) and (4).

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