Beware “fast buck” origination companies
Every business has its bad apples - and the multi-billion rand mortgage origination industry is no exception.
"There are literally hundreds of companies operating in this sector now," says Rudi Botha, CEO of leading originator PA BetterBond, "and while the great majority genuinely have the interests of their clients at heart some, unfortunately, see clients as little more than a means to making themselves a fast buck."
Probably the most common scam, he says, is the one where the so-called originator extracts an "administration fee" of between 10 and 18 percent from a client's further advance on an existing mortgage.
"In such cases, the client who borrowed R200 000, say, will end up getting only R180 000 or less, but still making repayments on the R200 000."
Another rip-off is the one where a supposed originator will offer to advance the client money until a further advance "comes through" - and then delay the application process while charging exorbitant interest on the money lent, at up to four percent a month.
"Such operators," says Botha, "tend to advertise very aggressively and unfortunately are attracting increasing numbers of victims. Consumers urgently need to be made aware of the difference between them and genuine mortgage originators, who derive their income not from clients but from the banks."
As a founder member of NAMO, the National Assocation of Mortgage Lenders, he notes, PA BetterBond is obviously keen to see all operators who claim to be originators abide by the association's code of conduct.
"And," he reiterates, "most do. But membership of the association is voluntary, and there will always be that handful of people who don't care about the industry, their clients or anyone but themselves."
The new credit legislation due to come before Parliament this year will go a long way, he says, to ridding the industry of bogus operators. "And there has been some talk about mortgage originators being brought under the auspices of the Financial Services Act, since they often do give clients certain financial advice."
But until there is clarity on either of these matters, there is little that NAMO can do except urge consumers to deal only with association members, to report originators who do not abide by the code of conduct, and to become more aware and able to protect themselves against the "bad apples".
To this end, Botha says, borrowers should refuse to do business with any originator or loan consultant who:
* Asks them to falsify any information on a loan application;
* Tells them it is all right to sign blank forms;
* Pressures them to borrow more money than they need;
* Pushes them to accept monthly payments they can't afford;
* Promises one thing and delivers another; and
* Won't let them have a copy of any loan offer or agreement they sign.