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 There have been calls for the government to regulate the local bond origination market with industry leaders indicating legislation would ensure consumers received expert advice when dealing with a relatively unchartered financial service.
A relatively new industry locally, bond origination has seen substantial success in Australia and is the business of finding mortgages that suit the specific needs of individual home owners. The key lies in giving clients a choice of banks and thus providing a hassle-free service without incurring additional costs.
Bond Choice CEO Richard Gray says the group, ranked among South Africa’s top three mortgage originators, has long held the view that the industry requires regulations to benefit consumers. During the recent property boom when bond origination scooped a toehold into the local market, consumers were baffled by a host of fly-by-night operators amid the more reliable bond originators. “Legislating the industry will raise the barriers to entry in terms of the professionalism offered and ensure the man in the street receives the right service and advice,” he says.
Rudi Botha, CEO of the PA Group, agrees that the industry needs to be regulated. “A legitimised, credible and professionalised industry with qualified, accredited representatives who are continuously developing to ensure a relevant value offering, is exactly what is needed,” he says. “This gives protection to all stakeholders – the consumer, banks, agents and originators and will ensure we will become an industry with a voice.”
In fact, a fully constituted association to ensure the industry is regulated – self regulated that is – already exists. The National Association of Mortgage Originator (NAMO) was established to promote the interests of consumers, lenders and the industry by:
- Instituting transparent processes which enhance professionalism and service excellence and eliminate improper and/or unlawful and/or unethical practices which cause actual or potential prejudice to the interests of the mortgage consumer and/ or the mortgage lending financial institutions and/or bring mortgage origination into disrepute
- Providing for the resolution of disputes and conflict between members and to provide a credible forum to deal with complaints against members by the mortgage consumer or the mortgage lending financial institutions
- Representing the best interests of member mortgage originators in all areas relevant to mortgage origination.
NAMO is a voluntary, non-profit association. Members subscribe to and are bound by a code of conduct of mortgage originators.
Jack Trevena, interim CEO of NAMO, notes that the industry is not completely unregulated, although there are no formal regulation measures in place. He says that 70% to 80% of the industry is made up of people who previously worked in the banking world, so it is not a free for all. But, he says, some formalised industry regulation is needed, but he doesn’t believe the government needs to legislate for the industry.
Typically, professional bodies govern the behaviour of their members, bringing into being a code of conduct and an ombudsman and thus recourse for consumers who experience poor service. The public can check the credentials of companies before engaging their services.
Gray says the Canadian bond origination industry has sound legislation governing its members. He estimates between 60% to 80% of South African bond approvals have followed the origination route against 30% in Australia and Canada.
Botha also notes that an ombudsman is essential to the sustainability of the industry which can be achieved only with consistent commitment and buy-in from the banks. Both he and Trevena say that this would go a long way to enhancing the industry’s image and promote professionalism.
Trevena says NAMO is garnering support from the financial institutions and estimates that by September, phase one of NAMO’s roll out will be complete. Once the banks have undertaken to support NAMO, Trevena says that phase two, which includes the development of accreditation criteria and requirements, can begin. He hopes this process will begin to take shape from June.
Article courtesy of  and is taken from their May/June 2009 Issue.
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