Smaller bankers are shedding the entrepreneurial model to pair up with larger lenders to stay in business on the retail side, while shedding the responsibilities of sole ownership.

One of the companies reporting on its success in offering this model is Residential Finance Corp. The company launched the model with 19 branches in March and now has a little over 30 branches.

The firm reported this month that smaller bankers are joining Residential Finance's retail branch operations to escape high overhead costs, burdensome expenses and shifting economies of scale that are squeezing out smaller brokers and mortgage bankers.

Daniel Jacobs, managing director of retail branching at RFC, noted that challenging times are making the retail branch model attractive to independent mortgage bankers or brokers who want to stay in business without the high operating costs.

"Regulations have made it more challenging for them to stay in business as stand-alone entities," Jacobs said. "Becoming a branch is like a breath of fresh air for mortgage bankers who have had to manage relationships with their referral partners and customers while running the entire back office of their business."