WHAT IS MORTGAGE ORIGINATION?
Mortgage origination is a well established concept internationally. Its application may differ slightly from country to country depending on the nature of the residential mortgage industry. In South Africa, where the residential mortgage market is dominated by four major institutions, the concept has a unique flavour. The industry has been established for some five years now and could equally have been termed mortgage broking.
Put simplistically mortgage origination looks to attract clients requiring finance for a residential fixed property and then placing that business with one of the major financial institutions. Those institutions would pay an introductory commission in respect of each successful transaction.
WHY WOULD BANKS BE PREPARED TO PAY FOR THIS SERVICE?
Consumers are becoming more enlightened to the concept that all bank products are not necessarily the same. This growth in consumerism has made the sale of single product lines more difficult and costly. Bond Consultants are increasingly becoming a scarce resource, particularly where there has been a dramatic growth in market activity. The mortgage originator can therefore offer banks the ability to secure business on a variable cost basis as opposed to having significant fixed costs.
To a degree it could be suggested that the banks have outsourced an element of their sales activity. Logically they would be prepared to pay for this service. Mortgage origination cannot however be simple intermediation. A successful business model can only be sustained if the process adds value to all the parties involved. Financial institutions are looking for cost reductions through the submission of complete and well-motivated applications. Lead providers demand improved efficiency as the key to a mutually beneficial relationship. The consumer requires independent, professional advice from a dependable source to aid them through the bond process.
HOW IS THE INDUSTRY CONTROLLED?
A person’s home is possibly the biggest financial investment an individual will consider. As such it is critical that the consumer needs to be reassured that the parties they are dealing with are qualified and dependable. The ethical standards of the industry are controlled by the National Association of Mortgage Originators (NAMO) to which organization all originators should belong. NAMO has established a code of conduct and is involved in the training and registration of bond consultants. The organization also has an ombudsman who deals with any complaints from the public. Wizard is a member of and supports NAMO ensuring that the consumer is reassured about the suitability of the party that is advising them on this significant transaction.
