What is a Bond Originator?

A bond originator can prevent nightmares when buying your dream home.  We have the tools to secure the best financing terms possible for you and the answers to all of your questions. Throughout South Africa, our Homeloan Junction consultants know their way around the business of home buying. Simplify the multifaceted process of home buying with a single contact to deal with the whole lending process.

What can a bond originator do for me?

When you consider the many benefits of a bond originator, you will be glad to have one working on your behalf.  Your estate agent works on your behalf to find and negotiate a purchase contract for your new home; we at Homeloan Junction can take care of finding the finance … and much more!

Homeloan Junction offers services to you both before you find your new home and after signing an agreement to purchase. Before you even begin shopping for your new home, use the calculators on our website. They make it easy to calculate how much house you can afford and what your monthly payment will be. You can then direct your estate agent to show homes to you that are within your price range. Prequalifying yourself avoids wasted time and disappointment.

9 Good reasons to choose a bond originator?

Are you ready to apply for home financing? The benefits of using a bond originator are many.

  • At Homeloan Junction, our advice is free. You pay nothing for our expertise
  • Your bond originator will walk you through the application.
  • Homeloan Junction has built up a relationship with the banks. Your bond originator  will know who has the best deals at any given time.
  • Your bond originator will submit your application to nine different banks,  one of which will have your best deal.
  • Your bond originator will negotiate with the banks on your behalf to secure the best interest rate possible.
  • Your bond originator does all the paperwork for you and explains the benefits of each offer.
  • You could prepare and submit an application to multiple banks yourself. However, an experienced bond originator will likely find you a better deal than you can negotiate yourself.  It will also save you time and aggravation. Remember, this is a free service.
  • Homeloan Junction has an impressive approval rate for home loans.
  • Your bond originator will work with your estate agent to make sure all agreed to terms are met in a timely manner.

Do you need these home loan services?

Bridging Loans: This short-term loan bridges a time gap. Your contract to buy calls for funds on a specific date. Your funds may not be available until 90 days after that date. What do you do?
Bridging Loans will prevent a delay, allowing you to uphold the terms of the contract. Bridging loans are the solution for those buyers unable to coordinate the purchase of a new home with the sale of their old one.

Home Improvement Loans: Home improvement loans are secondary home loans. Use one to remodel a kitchen, add a pool or an extra bathroom. They are also a lifesaver when homeowners need expensive emergency repairs. The payments are usually small and extended for several years.

Personal Loans: Personal loans are smaller than major home improvement loans. You can secure these flexible loans quickly and often over the telephone. This kind of loan will allow for quick completion of your new home décor. Maybe you need a new bedroom set complete with a memory foam mattress. Sometimes furniture and curtains from the old house do not work in a new one. The payoff term of a personal loan will be between 15 and 60 months but you can always pay it off early.

Investment Property Loans: Buy a house to let as an investment for your future. American billionaire Warren Buffet recommends investing other people’s money to gain the greatest return. You borrow the money to buy an investment property and the lessee pays back the loan in rent to you.

In twenty years, you have a valuable asset free and clear. You can sell the investment property or borrow against it. Use the funds to pay for university educations, weddings or early retirement.

Homeloan Junction is your point of contact for complete home loan services. Our experienced bond originator are sure to find the best rates and terms to fit your financial needs.

What’s Trending In SA Property?

The only constant thing about life is that it is never constant … and this is even true of property trends. Here in South Africa, we have experienced the opportunities that come with an economic boom, and stumbled on during a recession, so what now in 2016… and how do current trends affect your chances of securing a residential home loan?

The experts in the property world have varying opinions and expectations of what the market will be doing from here onwards. Their reasons for how the market has behaved in the recent past show as many discrepancies. So who to believe?  The Internet gives you plenty of access to information and opinion from well-informed estate agencies and property guru’s, but in the end you will have to choose to follow advice from those you trust.

A Little History 

It’s all been a bit of an economic roller coaster. The boom period preceding 2008 was wonderful for sellers, buyers and those in the property business. Equally delighted were the banks and financial houses as they were happy to grant residential home loans as South Africa’s interest rates were at an all time low. With the interest low, many people who previously could not afford the repayments of a residential home loan now qualified – although many viewed this easy credit as reckless lending.

A down trend followed with 2012 reflecting the start of a little relief, and an upward movement in the property market.  Fast forward to December 2015 and the economic disaster South Africans experienced overnight – so what to expect for this year?

What to Expect in 2016?

First-time home buyers seem to be driving the property market and the good news is that should this continue, we can hope to see a slow and small growth in the price of properties as the demand for properties remains. There is a twist to the good news, however, as this will be pertinent only to certain areas of the property market. The metro areas throughout South Africa have seen home prices rise – Santon, Umhlanga and Cape Town – and look to continue being popular.

The Atlantic Seaboard has always enjoyed rising property prices and the feeling is that their upward trend will continue – albeit slowly – as prices are still considered to be undervalued in this area. The fall in the value of the rand to the dollar is an attractive incentive for overseas purchasers.

One will not be criticised for being cautious, as the general opinion is that the residential home loan and property situation will have a very slow start in 2016. The shortage of property to sell will warrant that the prices of homes continue on a gentle upward climb.

Residential Home Loans – Why Go it Alone?

Although being careful, banking institutions are still looking to finance potential homeowners. This is evident in the larger value of the bonds being extended and a reduction amount of the deposit required. If you are a buyer and you are looking to purchase a home, being aware of popular trends makes sense. Most estate agents are willing to talk to you and walk you through all the pros and cons of making the decision of where and what to buy. Every potential homeowner has unique requirements and being able to discuss these with an experienced agent is always helpful.

An advantage to deciding on a property to purchase is to pre-qualify for a residential homeloan. Qualified estate agents and home loan originators work closely to ensure you receive exceptional service and advice. At Homeloan Junction, we will assist you with all the paperwork when you apply for home finance and our service comes at no cost to you.

You are under no obligation and we will make sure that you receive the best possible deal from the 9 different banks we approach on your behalf. Our experience and relationship with financial institutes will work to your advantage. This pre-qualification will allow you to gauge your credit rating and realise which price bracket the property you can afford falls into.

The Move is Towards…

Living close to CBD’s, sectional title developments, flats, apartments and complexes is the way things are moving. High density city areas are proving to be the most popular areas for buyers in the market today. Cutting costs on the size of your home, travel expenses and finding advantages in density living is the tendency today.

The tough economic forecast and the rising cost of living that South Africans face, coupled with higher interest rates and a shortage of sought after stock is the test for the 2016 property market.


A very interesting week last week. Two interest rate reviews, one up and the other, sideways.

But before we think about the effect of this on our home and homeloan businesses, here’s a quote from Ayn Rand to encourage you:

“In the name of the best within you, do not sacrifice this world to those who are its worst. In the name of the values that keep you alive, do not let your vision of man be distorted by the ugly, the cowardly, the mindless in those who have never achieved his title. Do not lose your knowledge that man’s proper estate is an upright posture, an intransigent mind and a step that travels unlimited roads. Do not let your fire go out, spark by irreplaceable spark, in the hopeless swamps of the approximate, the not-quite, the not-yet, the not-at-all. Do not let the hero in your soul perish, in lonely frustration for the life you deserved, but have never been able to reach. Check your road and the nature of your battle. The world you desired can be won, it exists, it is real, it is possible, it’s yours.”
– Ayn Rand

On 28 January, the Monetary Policy Committee of The South African Reserve Bank [SARB] announced an increase of 0.50% in the Repo rate, which will result in the Banks’ Prime lending rate increasing to 10.25% with effect from 29 January 2016. This was the first interest rate review mentioned above.

A few comments:

  • I heard a leading economist interviewed this week and he would not be drawn into quantum of the interest rate hike in 2016, whether 1 or 2%, but he did make the point that it would be well considered and managed.

  • I did stick my neck out in the last blog and say 2 % this year as I feel the Rand and inflation will have the final say on how much.
  • As regards the Rand, it was wonderful to see it pull back; from the mid-R16 range, to about R16.26 to close around R16.18 on Friday. So the market was factoring in a significant rate hike on Thursday and got it.
  • We are between a rock and a hard place with the interest rate. From a growth perspective, we cannot afford rising rates. Both indebted business [Employment] and consumers [Affordability] will find the going tough. Harming either constituency will harm the country. Sadly, though, with the Rand slide by about R3 from R14 to R16 (and as high as R17) to the US$, Inflation will rise. The 6 tons of Maize being imported does nothing to improve the situation. Last year, Inflation averaged 4.6% and in 2016, is expected to average 6.8%. The SARB target range is 3-6%.
  • Remember, absolute versus relative maths. “Only 2.2%” does not seem like much Inflation, but it is 48% [2.2/4.6*100] more Inflation than in 2015. In turn, the 0.5% rise in rates is not “just half a percent”, but forms part of a 1.75% rate rise off the lowest base, 8.5% on 20 July 2012,  since 15 November 1973 [See the Chart attached] when it was 8%. Therefore in relative terms, the cost of interest has risen since July 2012 by 21% in three and a half years. That’s a lot more interest being paid.
  • The process is being well managed and is simply unavoidable. The SARB has done the responsible thing and protected the Rand exchange rate which has been in a mess even before El Nene given Emerging Markets battling a very strong US$. By the way, a stable exchange rate to all major currencies is one of the core functions that a Reserve/Central Bank executes. In addition, if our Finance Minister has any chance of staving off a Non-investment grade rating by the Rating Agencies, he is going to need a strong, independent SARB doing what is right for Inflation. Also, by the way, his fight with SARS is also very important as they need to collect the revenues in order to keep Government stable. In the absence of efficiency in SARS, taxes will go up much more in February.

So, to sum it up, the rate rise was good for SA Inc, Inflation and the Rand/$ exchange but bad for Debt users. Overall, probably unavoidable after December 2015. I sincerely hope my 2% rise (1.5% remaining) proves very wrong for us. Watch the Rand, Inflation, the Drought and Oil.

With less detail, the US FED decision to retain the US interest rate where it is was is also them saying they do not want to dampen the US economy. That is really good news as:

  • The stock markets accepted that as meaning the US economy remains strong enough for about 2% growth in GDP. Hence the global markets rallied somewhat.
  • That fact makes up for China and provides them some headroom to work through their issues.

So, overall, a good week for rates in a fragile environment.

So what about us, you ask?

FNB put the house price rise for 2015 at an average of approximately 6.4%. that would give a real price rise of almost 2% after Inflation. ABSA, in their January 2016 synopsis expects an approximate 5% rise in 2016 and this will result, as we can expect from the rise in Inflation, in approximately -1.8% decline in real house prices this year. They quote a number of factors but the one that would concern me the most is weak Consumer Confidence. But please remember, the reversal in the real house price growth rate is because of the large increase in inflation and not necessarily because less homes are being sold.

That means that house prices will continue to rise so the question then is:

–        What volume will be sold?

–        How much of that will I, as the estate agent/principal, sell?

My sense is that less houses will be sold this year and the affordable homes will continue to dominate sales. My reasoning is simply that affordability will be affected by higher interest rates and Inflation will eat away little by little at our disposable income. I expect some tax increases but I’m not sure if the Finance Minister will target the rich or make them across the board. I don’t think VAT will rise as it is just too sensitive – we’ll see.

The last question remains yours to answer. When all the pundits have had their say and I have written mine, you must decide if you are going to list less, show less and sell less. That answer remains with you and your energy and enthusiasm. Believe all you read and internalise it, and anyone could predict your outcome – sales will slide.

Read it, think it through and find the way around obstacles with optimism and determination, not letting  the hero in your soul perish, and you will enjoy success. Check your road and the nature of your battle. The world you desire can be won.

Homeloan Junction has made that decision and will be there to support you in yours.

Yours in Property.


What is Bridging Finance?

Does this scenario sound familiar? Mark is planning to move to Pretoria with his family. The plan is to buy a new house from the proceeds of the sale of his current house. However, he will not be able to buy his new house before the purchase and transfer of the old residence is completed.

Fortunately, he doesn’t have to lose the new house. He may take a bridging finance option which will allow him to access equity from his current residence and use it as a down payment on his new residence. Does this sound like an option for you?

You’ve Sold … Now What?

Congratulations, you’ve sold your house! Now, all you can think of is moving on and getting into a new place. The only problem is that a seller of property is only paid the net proceeds from the sale on registration of transfer.  This can seriously hamper your style, especially if you’re in a hurry to get your family settled in a new home. Nobody likes disruption, and a house move is right up there with the major contributors to stress. Living in limbo is even worse! How can you secure that new home?

Registration of transfer is a lengthy process that can take up to three months or even longer. Fortunately, there are registered credit providers who offer sellers like you access to their funds within 24 hours in the form of bridging finance.

Let’s take a closer look at bridging finance.

Interim Financial Solution

Bridging finance is a short-term loan, usually for a period of two weeks to about three years. It is interim financing before a permanent loan or the next stage of financing is settled. Once the permanent loan is acquired, some of the money is used to settle the bridging loan before proceeding with the other financial obligations.

The Ins and Outs of Bridging Finance

Bridging finance is more expensive that other forms of financing. The extra interest levied on the loan takes care of the risk involved in dispensing the loan. The fee paid for processing the loan is also higher than that of conventional loans. There might be other costs that are amortized over a shorter period such as equity participation for the lender. When applying for a bridging loan, the lender may ask for collateral from several sources and a lower loan to value ratio in order to cover the extra cost. Nevertheless, the process of applying for the loan can be quite simple.

Bridging finance is very common in the commercial sector where the borrowers would like to have the finance to close on an opportunity. What about property deals? Many buyers take a bridging loan to buy a well-priced property, quickly. Others take such loans to prevent a foreclosure that could be in the offing.

What About Rates And Taxes?

Remember, there might be other costs which need to be paid for in advance, such as rates and levies. In order for a property sale to be registered with the deeds office, the local council needs to issue a Rates and Taxes Clearance Certificate. Any arrears on your rates and taxes account need to be settled immediately – what if you are not in a position to do this? Like Mark, you’ll need an advance to settle this bill, get the Rates and Taxes Clearance Certificate, conclude the sale of your existing property … and only then secure your new home.

Don’t let a small thing like settling your account with your local municipality stand in the way of moving on to a fresh start in a dream home. The bridging finance loan is paid back once such a property is sold or refinanced with another type of financing. A bridging loan may be all that you need to secure the residential or commercial property of your dreams.

One thing to bear in mind when you’re looking for a bridging loan: it pays to go with a registered credit provider to get competitive rates and fees.

Does it sound like you could use bridging finance to relieve your financial stress? Get in Touch

Yours in Property


What will my monthly bond repayment be?

Budgeting in general can present major headaches for people but a bond repayment calculator, if used correctly, could help to ease the pain. Coming up with a realistic budget — whether for the purchase of a new home, or for the necessary control of household and monthly expenses or the entire expenditure plan for a whole country — can bring its fair share of headaches, even when you know it will be implemented in the most skilful and savvy way. So, don’t feel disheartened: you’re not alone if you’re facing the tiresome task of working out your budget.

If you’re planning on buying a house, you’ll need to know how much you can budget to spend on the loan each month. And you’ll need to know this before you go house hunting if you want to avoid disappointment. Imagine spending valuable time finding a dream home, only to discover that it is out of your price range! Luckily, Homeloan Junction offers you a simple, online tool to make this easier for you. Try their free bond repayment calculator to see if you can afford the house you love

How a Bond Repayment Calculator Works

When you are shopping for a new home, the last thing you want to discover is that the amount you thought you could afford is actually quite a bit different to the amount you can realistically afford each month. It’s best to find these things out before you go charging headlong into the process – and certainly well before you sign any Offers to Purchase.

Nowadays you can explore your options in the privacy of your own home, with the help of a bond repayment calculator. Having the benefit and independent use of an accurate bond repayment calculator in front of you, can help you create a more realistic assessment for the way forward. Remember, when you make your calculations, it is important to take into consideration that financial circumstances can change, so be sure not to stretch your budget too far.

Go ahead and test the bond repayment calculator tool on Homeloan Junction’s website. You’ll see that in less than one minute you will be able to quantify the amount of the bond you are eligible for … and the amount you can realistically afford.

Easy-To-Use Bond Repayment Calculator

You also have other calculation options over and above the bond repayment calculator available at your fingertips. With the useful calculators on the Homeloan Junction website, you can work out how much you will be able to afford to pay, you can project bond and transfer costs, and also work out how much you could save on interest with a bigger deposit. The website is well-optimized which means you’ll experience no problems with speed, and you’ll have the answers to your questions in a few minutes. Also, the calculators are simple to use.

Whether you are working out a budget that includes a new bond or re-evaluating the way forward with existing bond repayments, after spending a few minutes with these versatile tools you will soon see that they are quite easy to navigate and apply to your own, individual needs.

Save More and Pay Less

The most successful and accurate assessment of how much you can afford on a homeloan will come from thoroughly doing your homework. Don’t stop once you’ve assessed how much you can afford to pay as a monthly instalment, research as much as possible about the methodologies that can be applied to see you save more and pay off your bond in the shortest period possible. Banks in general are happy to see you stay with them for longer; after all you are generating streams of income for them. But will this really work for you?

A successful trick is to pay off your homeloan over a shorter period, but this entails a disciplined approach. Prioritize this expenditure and also seek new ways to add a bit extra to your repayment schedule. This is another reason to keep your budget realistic – give yourself the option to pay more into your mortgage each month, allowing you to save more and pay less.

Do you need assistance in determining your ideal homeloan amount? Even if you have used the useful bond repayment calculator to find out how much you can afford, you can also talk to one of the qualified and experienced consultants at Homeloan Junction to help you make accurate assessments.

Why get pre-qualified?

It used to be that buyers looking to purchase property could secure an actual pre-approval from banks or lenders for a homeloan, but with the advent of the recently revised National Credit Act (NCA) those days are gone. That said, it is still possible for a potential purchaser to get pre-qualified for a homeloan. However, buyers must understand this is a service, as opposed to a product, offered by bond originators to assist them in ascertaining if the buyer can realistically afford the homeloan they’re applying for. While it is not a guarantee of approval – the final decision rests with the bank – pre-qualification does have a valuable place in the home buying process.

Avoid Disappointment

Getting pre-qualified for a homeloan is free and can help you determine the price range you can afford to explore before you even go looking at potential properties. This helps you avoid wasting time and effort looking at properties you have no hope of securing a homeloan for, as well as the inevitable disappointment if you’ve set your heart on a home out of your price range. On a positive note, pre-qualification is an excellent guide for establishing realistic expectations as far as your purchasing power goes.

It’s Quick and Easy

The process of getting pre-qualified for a homeloan is quick and relatively simple. Under the revised NCA, it typically takes into account your disposable income, either individual or joint depending on your marital status, and your credit score. The latter is with your consent, naturally, but considering the bank or lender is going to take your credit score into account when you do make formal application for a homeloan, you may as well know now exactly where you stand in this respect. The other bonus of establishing your credit score at this point is that if there are any issues in this regard, issues that could potentially hinder your homeloan application, you can take steps to resolve these issues sooner rather than later. Pre-qualification can also give you an indication of whether you need to save for a deposit or not.


To complete the pre-qualification process, you will require the following paperwork: your identity document; your most recent payslip; and your last three month’s bank statements. Your disposable income is calculated by deducting tax, UIF and any company pension payments from your gross income. This leaves your net income and once your total monthly household and utility expenses and any credit, vehicle or other loan repayments are deducted from this amount, what remains is your disposable income. Most banks and lenders will calculate the maximum monthly instalment as 30% of your gross income.


Another advantage to using a bond originator to get pre-qualified for a homeloan is that the bond originator will determine your chances of firstly securing a homeloan, secondly establishing the amount you’ll qualify for on your current income.

What happens after you get pre-qualified for a homeloan?

Once the pre-qualification process is complete, you will receive a certification stating the homeloan amount you are deemed capable of affording. Note that while this certification is only valid for a limited period it is still a valuable first step onto the property ladder and gives you the leverage to confidently negotiate with a seller and put in an offer to purchase. Getting pre-qualified for a homeloan indicates to the estate agent and seller alike that you are serious about the home buying process. Furthermore, it can improve the likelihood of your formal bond application being approved. And even speed up the application process, particularly as you’ll have dealt with most of the obvious hurdles by completing the pre-qualification process.

Pre-qualification is an excellent tool to aid the potential purchaser in navigating the home buying process. It empowers you to enter the real estate market with your eyes wide open. If you are planning to buy property, take the hassle and uncertainty out of the process by getting pre-qualified for a homeloan. For assistance, contact Homeloan Junction.

Banks vs bond originators – Which offers a better deal on your home loan? ( Part 2)

The Press has recently had another look at Originators vs Banks and the articles have become well-publicised. A link to the MONEYWEB Today article is  below for your convenience.

In my first blog of this 2-part series, I covered the history of the banks and their homeloan businesses culminating in the business model of homeloan consultants who called on estate agents and paid small commissions for their business. In 1999, the landscape changed again.

MortgageSA and PA Homeloans, [now, ooba and BetterLife] began to slog it out in the market and were later joined by the ex-NBS team in the form of Bond Choice. The three originators, made hay while the sun shone and decimated the bank homeloan sales forces. In this context, just a brief note on the so-called “love-hate relationship” between the banks and originators. Bear in mind, I express my personal views and, in doing so, fully accept that I may have people who disagree with me.

In 1999, if the banks wanted to retain their own dedicated sales forces into the market, then what they did was difficult to understand. Any amount the banks paid to the new originators that enabled the originators to pay the estate agents more than the banks’ 0-0.3% was destined to disintermediate the banks from their estate agent relationships. No profit-orientated business person would walk away from a higher homeloan introductory commission – the end of the bank homeloan consultant was in sight from the beginning. To keep it simple, let’s say the originator commission was 2%, then the originator could pay 1% [anything more than 0.3% was good enough] to the estate agent and keep 1% for their consultant, overheads and profit. Throw the dramatic property market upturn of 1999 to 2007 into the mix and the stage was set for massive change. If there is love-hate, the banks can be forgiven for giving away their direct right of access to the residential property market. No wonder they might feel aggrieved. By the way, the banks’ commercial property divisions did not follow their residential counterparts’ leads and to this day, have a small broker component with the majority of business coming directly.

On the other hand, what the originators did to the banks was unacceptable. One thing an originator cannot argue, morally or contractually, is that they do not take the risk of the homeloan. Controlled by onerous Banking legislation which incorporates capital and informational requirements, the banks proceed to approve the homeloan application and then administer it and its risk for the lifespan of the loan. Every event of the customer –  death, joblessness, errant credit behavior, over-indebtedness, interest rate increases – is felt by the bank and worked through for 20 to 30 years.

Let’s never forget that banks are fiduciary institutions and, as channels of the nation’s savings, bear responsibility to depositors to give them their money back with interest, and on time. I always say, a bank’s name is spelt, T-R-U-S-T. Break that and you break everything. In the light of this view, the behaviour of the originators was sometimes arrogant and demeaning to banks. All of us had a role to play in the response eventually taken by the banks to bring the industry into line. Just the practice of “shopping” to every bank willy-nilly was unacceptable. The average conversion rate of 18% was in poor taste and mathematically boiled down to 4 banks divided by four submissions of the same deal less NTU’s; plus-minus 25% – 7% = 18%. What a waste of admin capacity, time and money.

With these strong views as both a banker and an originator, I read the article below and make some pertinent comments in closing.

Banks deserve the utmost respect of the originators. They carry the risk for the lifetime of the homeloan in the face of increasing compliance legislation. Nothing or no one in origination should be allowed to treat this responsibility lightly.

In turn, banks benefit from a variable, once-off commission, or introductory fee if you prefer,  at a rate they have calculated over years and agreed contractually. Some points bear emphasis:

  • As a variable rate, the banks bear no overhead in the ongoing acquisition costs of the originator. They have effectively curtailed the fixed cost, fully absorbed nature of their homeloans’ acquisition. That’s good business.
  • The use of Comcorp and the originators’ own platforms radically reduce homeloan processing costs.
  • I contend that the current commissions paid to originators are not only variable but also less than the fixed cost, let alone the fully absorbed fixed cost, of acquisition for a bank. In this regard, it is no accident that insurance companies have long embraced the broker model and latterly only, the digital platforms, even in the face of their broker strategies.
  • Sensibly, a bank would outsource to a responsible origination force but for the relatively few customers who insist on dealing with bank-branded homeloan consultants in specific higher net worth channels.
  • The banks will never outsource their credit evaluation models. The seduction of lower costs is far outweighed by the risk of manipulation. On this front, banks’ fraud protection units are critical to combating this scourge in financial services. Regretfully, this stance will always mean a higher cost of delivery but no bank can be blamed for holding credit quality as sacrosanct to itself.
  • Origination exists because the banks want a secure, reasonably priced, variably-costed channel. In doing what they did with the average origination commission, the banks effectively stabilised the industry and made it sustainable.

 In turn, the originators have a compelling proposition. It is simply this:

  • The originators provide Choice in a financial services industry awash with options. Choice of product, institutions and interest rates. I am often asked if I “get the best rate” and my answer is No, I get the best credit terms. What I mean by that is, does a customer want Prime-0.5% with a 10% deposit, or Prime+0.5% without? That is Choice in action; the customer’s call. I have the chance as an originator to present such options repeatedly and from different banks.
  • The originators provide Convenience. At the offices of their agents, in the homes of their customers, over the phone with attorneys, linking with bank assessors – origination consultants do an incredible job Conveniently. Their costs are their responsibility and they are paid on success only – like estate agents, true entrepreneurs who start every month from scratch.
  • Originators are Experts. Because they only do homeloans, origination consultants, many of whom came from the banks in the first place, are steeped in homeloans. This expertise, coupled with close networks with principals, developers, conveyancers, assessors, bank representatives and insurance specialists, is brought to bear in the submission of the homeloan application. Such dedicated focus is rare in retail banking today. It’s quite correct, as one of the experts in the article below mentioned, that origination consultants have an excellent idea where to place a particular customer’s homeloan for best results.
  • As regards interest rates, I sense that customers are viewed by the banks for pricing in sophisticated pricing models and that little deviation occurs from it for the sake of an originator’s customer. On the other hand, I’m not convinced that customers get better rates by going direct – the full absorption cost of a bank would probably make sure of that. As a result, an originator’s ability to consistently get better rates for their customers will remain confidential to the banks with much annecdote around it. One thing is for sure though, a hungry, commission-driven originator consultant will fight tooth-and-nail for her customer.
  • Finally, the customer gets all this for Free. That’s the biggest factor in favour of the value proposition of origination. You don’t pay at a bank either if you go direct but the cost of time parking, in queues, the car guard and the paper trail all add up.

Now let me sum up. The history of homeloan acquisition is interesting and its evolution has netted for South Africa one of the most effective homeloan businesses in the world. The banks spawned origination when they bought the origination proposition. The originators have taken hard knocks to reach the point at which their industry is attractive  to the banks as viable and sustainable with acceptable credit and fraud risk in the process. It would seem, like many new industries, the origination industry has matured into a worthwhile business proposition and partnership with the banks.

Love-hate? I guess not. Partnership is more how I like to think it; built on mutual respect, a desire for long-term sustainability and cost effectiveness.

Here is the link to the article on Moneyweb – Banks vs bond originators – Which offers a better deal on your home loan?

Want to know more about the services Bond Originators offer, Get in Touch


Banks vs bond originators – Which offers a better deal on your home loan? ( Part 1)

The Press has recently had another look at Originators vs Banks and the articles have become well-publicised. The MONEYWEB Today article is copied below for your convenience.

Looking at it and the articles received courtesy of ooba Marketing, I am excited again to write about the phenomenon called Origination. I will spill over into two articles.

I have an uncle who quotes: “Life without history is no life at all,” so let’s go back a little…

In 1999, origination began with an offer by Standard Bank to MortgageSA to pay a commission for completed bond applications. This event spurred the Property Association to become involved in the industry. In those days it was called Bond Broking but the word, Origination, was eventually adopted from the American term.

The Americans had a different means of origination which has never taken hold here and probably never will. In their case, Fanny Mae and Fanny Mac, their great executors of The American Dream, were established as the conduits of the Nation’s savings into home ownership.

We have much to thank the Americans for when it came to South Africans being brought up to believe that home ownership was an important step in “growing up”. “You need to buy a house”, your mother would tell you. In order to garner home loan applications that could be discounted into the companies, both Mae and Mac set up Originators and Servicers [two terms still used in the Securitization industry today].

The originators did what we do – called on the estate agents, completed the application and submitted it to the Servicer sometimes via the credit score of the company, or the Servicer did the credit approval. The Servicers captured the application and administered it for statements, arrears, upgrades and all payment calculations.  The point is that Mae and Mac both had similar models and outsourced their homeloan acquisition and servicing to Originators and Servicers. In this model lay the seeds of the disgusting practice of black-box finance that eventually lead to the Sub-prime crisis that brought much of the World’s economy to its knees in 2008-2010.

What the originators and servicers did was reason that it was silly to administer home loans one at a time when you could package them as a portfolio of risk and then just sell them in billions of Dollars at a time to banks, and Mae and Mac. The premise was simple, “you can’t lose on property” so who cares about affordability, you just repossess the house and get your money back.

Problem is that when lots of houses come back at the same time, property prices collapse. Then the financiers, wooed [greed was alive and well] by market share and interest earnings, took away deposits and over-lent on properties. 30 year fixed rates at less than 3% were marketed so you were crazy not to borrow against your house. What mayhem followed! Our banks over-reacted though as the tsunami of negative sub-prime sentiment swept across the finance world and, in many ways, changed the landscape of mortgage finance completely. By the way, “sub-prime” does not mean “less than Prime interest rate”, but rather it is the term given to assets in a portfolio which are “less than their best” ie “below being “prime” assets in value”.

So why do I sayhas never taken hold here and probably never will”? Our banks are multi-product institutions which are fully integrated from an administrative point of view. They do not need Servicers as their Operations departments are effective and efficient in multi-product administration and, legally, it would be very difficult and unacceptable, for our banks to sub-contract affordability which has now become law through the National Credit Act.

I remember once talking on World Report, a global BBC phone-in programmer, and being slated by an American guy who described SA as a nanny state because we have affordability guidelines and laws that govern how credit can be lent. Shame for him, as two things saved us in Sub-prime, one was that we have always been strict on affordability and the second, that we never conducted black-box securitisation in SA and were somewhat restricted from investing in such homeloan portfolios by our foreign exchange regulations. Thank Goodness!

Back to local history. In the 1960’s bank capital was scarce and the South African Reserve Bank held tight reigns on the banks and building societies. At that time, estate agents brought their completed bond applications to the Building Societies’ branch managers and then vied for the available capital of the day. I can even recall my Dad selling a house in Amanzimtoti and giving his buyer a “collateral” bond. This meant that the seller forfeited some of his sale price, 5 or 10%, to help the building society with capital to finance the bond for the buyer. This process revolutionised with the demise of the Building Societies Act and the modern Banks Act in 1973.

Banks could then more freely access capital and began to do their own homeloans – ABSA and Nedcor were born out of this huge change in legislation. It took Dr Theo Wasserman, CEO Trust Bank, to change the bond acquisition landscape for keeps. He decided to deploy smart looking “home loan consultants” to call on estate agents and canvas business. Their claim to fame was simple: “We come to you and take all the paperwork away.” No self-respecting estate agent would say no to that  and so the other banks followed suit and home loan sales forces were born. It truly was a brilliant move by Trust Bank which was, as you know, eventually absorbed into ABSA. The consultant salesforce model prospered right up to 2000 and were eventually paying between 0-0.3% for bonds for their respective banks.

Now that I have completed dated myself, let me conclude this first blog post saying that the love-hate relationship purported between the banks and the originators has been fantastic for the home loan industry in South Africa. More on that next week……….

Here is the link to the article on Moneyweb – Banks vs bond originators – Which offers a better deal on your home loan?

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