NC Restricts Net Branching

North Carolina has issued very restrictive guidance on "net branching" that is expected to lead to a crackdown on mortgage bankers or brokers who maintain loose affiliations with loan officers who operate out their homes.A declaratory ruling issued Nov. 6 by the North Carolina Office of the Commissioner of Banks points out that the state legislature considered net branching when it passed the Mortgage Lending Act of 2001. That law, which went into effect July 1, 2002, presumes accountability on the part of mortgage lenders and brokers who sponsor net branches for the actions of the loan officers in those branches. "To the extent that a licensee seeks to shift responsibility and accountability to the branch manager and away from the licensed firm which purports to operate a location as a branch, such arrangement is unlawful under the Act," the Nov. 6 ruling says. The ruling says it is unlawful for a loan officer to operate out of his or her residence unless the lender has licensed that branch and designated a qualified person to supervise it.