|Consumers have been warned to select their mortgage origination companies with care or risk being slapped with hefty fees that could run into tens of thousands of rands.|
These fees are in addition to the fees that these companies receive from the banks for providing the service in the first place, warned Andrea Atkinson, mortgage origination manager for Bond Choice Home Loans in Port Elizabeth.
Emphasising the fact that "ethical" mortgage originators did not charge consumers for their services, but relied solely on the commissions paid to them by the banks, Atkinson said that people were nonetheless falling victim to a new breed of originator that preyed on the uninformed.
"Consumers are at risk of being charged heavy 'administration costs', whether or not they proceed with their bonds," she said, adding that there had been a number of cases recently in which clients had signed contracts with certain mortgage originators that contained clauses making them responsible for costs. "People are being caught by these unscrupulous players who advertise maximum concessions and approved finance but who omit to mention in their adverts that they charge a percentage of the bond value, which can amount to thousands of rands."
Mark Beckett, managing director of Bond Choice Home Loans and an executive committee member of the National Association of Mortgage Originators (NAMO), said he had received a number of complaints from people who had unwittingly signed documents giving these mortgage originators the right to procure mortgage finance for them.
"Unbeknown to them, they also signed to pay a percentage fee based on the value of the bond to the mortgage originator, which in a recent case amounted to R21 000 on a bond of R460 000," he said.
Calling this practice “bordering on the immoral”, Beckett said there was currently no legislation in place to prevent unscrupulous operators from charging their clients fees. "It's a practice that we consider to be morally wrong, but until legislation is promulgated to prohibit it, NAMO doesn't have any authority to act," he warned.
Adding that these operators were clearly not disclosing their charges upfront to consumers, Beckett said their advertising was misleading because it did not refer to their costs for providing the service. "We are totally and virulently anti this practice since we believe that we earn enough from the banks to cover our costs without having to still charge the consumer," he said.
Without legal protection, concluded Atkinson, the need for consumer education in this regard was vital and ongoing. "It's critical that people not only use reputable origination companies that are registered with NAMO and that subscribe to the association's ethical standards but also that the consumer must enquire upfront whether there are any costs charged for the service," she said. Property owners needed to be aware that they could access equity in their property via an originator without any cost to themselves since mortgage origination was essentially a free service to home owners and buyers.