Challenges will yield a bright future for originators
New bank agreements signals a time of change for originators who need to adapt to the new business climate
The fact that 2009 will be a year of change can no longer be disputed. Changes in the property market started off with a bang early in the year with the future of origination being called into question. This was amid much media speculation around whether or not the South African financial institutions believe there is still a place for the service originators offer.
Rudi Botha, CEO of the PA Group (holding company of Betterbond, South Africa’s largest originator), says: “In order to ensure a sustainable future for the business of origination along with all the interlinked partners, we are engaging with the banks to find a workable solution to the current challenges.” He says that even without the possible reduction in origination fees – as is currently under negotiation with the banks – the origination industry is a young one that is facing the challenge of maintaining in these turbulent economic times, especially in a low volume environment.
Botha stresses that the banks do still see the value in dealing with originators and that they will continue to utilise the services offered by the industry for all new homeloan business. However, one thing that is certain is the commissions paid to originators by the banks will be reduced. The PA Group estimates the commission reduction to be as much as 70-90 basis points.
“These potential changes will have a huge impact on how originators operate in the future. Now is the time for originators to take a serious look at their fixed costs as a percentage of expenses on a monthly basis,” says Botha.
He goes on to say that while many people see these changes as a crisis situation, and in some instances rightfully so, he sees huge opportunity for originators who are able to:
- Adapt quickly
- Become more innovative
- Find a niche market
- Grow the client base where other originators have left the industry
- Run a low fixed cost business
- Utilise exceptionally qualified consultants that provide a great service to the customer, the agent and the bank
- Submit quality deals to the bank to ensure less wastage
- Have solid relationships with the source of business
- Pay out referral fees to sources of business which are based on good business principles
- Diversify income streams by earning revenue on additional product or service offerings
“Now more than ever, standing together as an industry and creating a sustainable future for all originators is of vital importance,” says Botha. “It is imperative that we revive an organisation such as National Association of Mortgage Originators (NAMO) to look after our interests and to promote our industry with all stakeholders, especially the consumer.”
He says that the originator’s value proposition to the banks, real estate agents and the consumer has not changed and that many fly-by-nights will leave the industry to make way for the professionals who will ensure the maturation of the industry over the next two years.
“While many challenges and some pain may pave the way forward, a great future beckons for those who can survive this year,” Botha concludes.
