Big bank dumps biggest home loans' originator

Standard Bank (JSE:SBK), one of South Africa's biggest banks, has dumped the country's biggest home loans' origination group, ooba, choosing instead to opt for three of ooba's competitors and its own bank channels to attract and process mortgage business. It is hoping to stir up more competitive behaviour in the origination industry, with the end result being lower commissions paid to originators.

Ooba's name was conspicuously absent from a recent announcement by Standard Bank updating customers about its home loans strategy. Ooba is the largest origination group and is owned by estate agencies. Its largest shareholders include the Pam Golding, Seeff and Jawitz operations.

Standard Bank announced revised home loans' criteria, which included 104% loans for properties bought for R1m and more, and revealed that it would do business with three originators: BetterBond, Bond Choice and Multinet. It said the bank had accepted "tender" proposals from these originators, with new commission rates. The three began submitting applications from 24 August. Standard Bank did not divulge the commission rate details.

Earlier this year, ooba was embroiled in a legal battle with Standard Bank over commissions paid for channelling home loans to the bank. The bank declined to accept business for a period in a tussle to reduce the commission of about 2,5% it paid to ooba. At that time, Standard Bank had a contract with ooba.

Now, however, the strategy has changed, and the bank has instead asked mortgage originators to submit tenders.

Neither ooba's chief executive officer Saul Geffen nor Standard Bank's media relations officer Ross Linstrom would comment on industry talk that Standard Bank customers who obtain bonds with other banks through ooba can expect a sweetener in the form of a discount on the interest rate being charged - a move that would undoubtedly undermine Standard Bank's efforts to grow market share without the involvement of ooba.

Linstrom said, however, that Standard Bank "does not intend to lose market share". He said the bank "remains highly competitive and geared to optimise market share". He said the bank "expects to compete vigorously against other banks" and that the property market is "a very competitive sector".

Standard Bank does not want to do away with originators, but it clearly wants to considerably reduce its reliance on them.

Said Linstrom: "Standard Bank still sees value in servicing our customers through mortgage originators. However, Standard Bank has geared itself to service more of our customers and potential customers through existing Standard Bank channels."

He said there were no outstanding legal issues that needed to be resolved between Standard Bank and ooba and that the bank had decided to accept only three tender proposals "to allow for greater levels of competition". He said the tenders were awarded on "measurable" and "objective" criteria.

"Standard Bank is of the view that by accepting three tender proposals, greater levels of competition will ultimately result in a cost efficient service that will benefit customers." Linstrom added that the bank "reserves the right to call for tenders at the bank's discretion".

Geffen would say only that his organisation believes "in time, as the lending environment improves, ooba and Standard Bank will again do business".

"Over the past eight months originators have operated without Standard Bank. Standard Bank has now contracted with mortgage originators, and this is a recognition by Standard Bank of the value proposition of origination to the consumer and as a key distribution channel for the bank," said Geffen.

He said "all the other major lenders have forged strong partnerships with ooba for mutual benefit and we are building on those partnerships".

Despite being left out of the loop by Standard Bank, ooba has reported an increase in loan approvals.

Although this increase is off a low base, Geffen said there are "clear signs that we have seen the end of the trough, and that transaction volume is definitely coming back into the market".  - Write to: jackie@realestateweb.co.za

Do you think Standard Bank can afford to cut ooba out of the loop? Is this move good for home loan customers and Standard Bank shareholders? Share your views, below this article.

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responses to this article

Who wants to deal with a standard bank anyway? Greed manifests itself in many forms. Banks can certainly choose to do business with whomsever they wish. They decide to whom, how and when to grant home loans. Std bank would like to think that consumers are at their mercy. Fortunately, it is not the . .more only bank out there. Ooba must disclose to its clients that it cannot submit applications to std and ask clients to do so themselves.By the way it is this very bank that decided earlier this year not to lend to those consumers other than its own clients. . .less by babs on September 17 2009, 13:01 Find this comment inappropriate? Report it

Rid ourselves of bond originators, ... appy to the banks personally/directly for a home loan will save you plenty moolahs! Neither the public nor this country need the likes of bond originators who only fuel inflation! Hopefully the snake oil salesmen, viz. estate agents, will soon get the . .more same treatment!!! . .less by Compadre on September 17 2009, 13:49 Find this comment inappropriate? Report it

My advice, skip standard bank Have been a standard bank customer since my early teens, bought a house 2 months back and Standard offered me prime -0.6. Went to Nedbank and they offered me prime -1.7. Bye bye standard bank forever. by S.B on September 17 2009, 14:10 Find this comment inappropriate? Report it

@babs So babs, do you work for ooba or do you feel victimised by Standard because you overextended yourself? Surely it must be one of these options. by Bob on September 17 2009, 14:15 Find this comment inappropriate? Report it

I Agree Standard Bank are a bunch of backward banker Wan%rs. Screwing their suppliers and clients, WOW 104% bonds for over a million, people who buy these properties don't need the 104%, its the lower income bracket that need this type of support. by STB on September 17 2009, 14:20 Find this comment inappropriate? Report it

Standard vs Ooba It took 5 years for the bank to realise they were paying millions to an 'agent' for filling a few forms they could have done themselves - hahahaha - At least they made Geffin rich by Thabo on September 17 2009, 14:31 Find this comment inappropriate? Report it

std bnk yes by xed on September 17 2009, 14:31 Find this comment inappropriate? Report it

STD Bank I never liked Standard Bank, and to be honest, I also dislike originators as they are not absolutely essential to the process. However, having said that, if you look at the the setup overseas in such countries as the USA, it is clear that originators are . .more here to stay. Since we are following the trends overseas, albeit always a couple of years behind, it is patently obvious that STD Bank will not be able to wish originators away, much as they want to. Perhaps the solution is that the 4 major banks accepts once and for all that the originators are here to stay, but renegotiate their fees so that the consumer, who is untimately paying for the originators commission, does not get ripped off. . .less by Daniel on September 17 2009, 15:10 Find this comment inappropriate? Report it

Origionators Origionators never added any value from the start it was just one big con capied from a very different market, namely the USA, and All the local banks fell for it making Geffin and Co very wealthy, good for them, sorry for the banks shareholders. by Bob Hope on September 17 2009, 15:11 Find this comment inappropriate? Report it

Are ooba shares worthless? Are ooba shares worthless, and therefore should estate agencies consider their options? by Questions on September 17 2009, 15:15 Find this comment inappropriate? Report it

@Bob Be careful with untested assumptions. I do not work for ooba, or in the banking or pty industry. Have never extended myself, have plenty money left over to invest (am childfree), spouse has two bonds with std (refuses to quit them) I have bonds with other . .more banks and am still buying. . .less by babs on September 17 2009, 15:17 Find this comment inappropriate? Report it

@SBK's Malema you must be joking right? by Honestly on September 17 2009, 15:25 Find this comment inappropriate? Report it

Bad Service Anyway Std Bank's service is so poor anyway they won't be seeng me any time soon. by Rob on September 17 2009, 15:27 Find this comment inappropriate? Report it

Who cares... ...about Ooba anyway? by Piet Pompies on September 17 2009, 15:27 Find this comment inappropriate? Report it

bond originators just another level of costs. direct to the banks is cheaper but one can do better than standard!! by erewhon on September 17 2009, 15:45 Find this comment inappropriate? Report it

Bond Originators Be your own bond originator. Why should anyone fill the pockets of agents. Go without them and become rich by keeping all your transactions simple and direct. by Gert on September 17 2009, 15:48 Find this comment inappropriate? Report it

Standard Bank strategy I see no reason that banks shouldn't sell mortgages through intermediaries as is done with insurance. However, if Standard wishes to rely on its own systems and staff to gain (or keep) market share, it should seriously set about improving them. . .more No matter how many slogans their marketing department concocts, their poor service will keep customers away. Were it not for the costs of transferring a bond, I would have left them yonks ago. . .less by C on September 17 2009, 15:51 Find this comment inappropriate? Report it

have u heard of MY MORTGAGE and did u lose money? have u heard of MY MORTGAGE and did u lose money by Jack The Whack Milne on September 17 2009, 16:20 Find this comment inappropriate? Report it

Please explain how it is cheaper going to the bank directly? can't wait for all the people who have a negative view of originators to apply for a bond directly to the banks. Firstly the application process is more complicated than just filling out a few forms, you will soon realise all the additional documents the . .more banks require. You will also realise that getting feedback on the progress of the application will test your patience levels. Secondly Originators obtain interest rate quotes from various banks which can be used as a bargaining tool to get the client the best possible rate which results in thousands saved over the life of the loan. Do you think a bank branch employee is going to fight to get you the best rate? They work for the bank, obviously not. Thirdly Originators work closely with the transfer and registration attorneys in order to transfer and register the property as quickly as possible and address any delays if need be which is beneficial to the Seller, Purchaser(client), Estate Agent and Originator. And the myth of originators being the middle man costing the client more? Please explain that to me when Originators get you better rates than you could on your own and you do not pay them a cent for their services? . .less by Originator on September 17 2009, 16:22 Find this comment inappropriate? Report it

Bond Origination costs 2.5% of R100,000 is R2,500 2.5% of R1,000,000 is R25,000 Someone at the BANKS and The BOND ORIGINATORS must have their heads examined. by Mr. X on September 17 2009, 16:45 Find this comment inappropriate? Report it

@Originator In answer to Originator. If originators are so essential, then how on earth did we manage all those years and years without you ???? Please explain to me. Secondly, regarding your comment that clients do not pay originators a cent. Skattie, let me tell . .more you, we may not be paying you directly, but where do you think the bank gets the money from to pay you your several thousands of Rands of commission ? That's right, they recoup it from the suckers called their clients in the form of bank fees and interest. Surely you know this, or are you simply playing stupid in the hope that people will believe you? So, skattie, you see, we are after all paying for your "services". Thirdly, regarding your comment that you organize better rates. I can also apply at the big 4 and shop around for rates and play off the one against the other. Ain't no brain surgery, here. Regarding your comment that the forms are so very dificult, wow, give me a break, if bank officials can complete it, then so can any idiot. The botton line is simply this, originators are not essential, they are simply a middle man aiming to cash in on lucrative property transactions by pretending to be necessary. Sorry skattie, as they say, you may fool some of the people some of the time, but not all the people all the time. Be gone you useless scoundrels !!! . .less by Dave on September 17 2009, 17:39 Find this comment inappropriate? Report it

bond originators have a place in markets where the offering is huge but in SA there are 4 big banks, a few smaller ones and a few dedicated homeloan businesses (like SA homeloans) so less than 10 players with 1 product personally i found it pretty easy to call around and save the origination fees..... by charlie on September 17 2009, 17:59 Find this comment inappropriate? Report it

Originators and banks Originators are outsourced bond sales people, commission reps owned in ooba case by the estate agents who sold you the house you are trying to finance and earned up to 7.5%, paid by the banks, unregulated commissions, on high value big ticket items, . .more almost everyone wants. Who in their right business mind would'nt want part of that action. When buying a property do your own sums and decide what suits you best someone with a bit of clout if you have none or a convienience or a waste of time. The 2.5% looks very high for the service being rendered no wonder Std think they can do it cheaper using a tender process or direct. General banking services are shocking all over the world and SA is right up there with high cost, low value add, essential ,grudge purchases, run by quasi cartels. . .less by Robert on September 17 2009, 18:31 Find this comment inappropriate? Report it

Ooba is tops Being a customer with Std Bank for 22 years and having had all my previous homes and my existing home bonded with them, I recent applied for a bond at Std Bank to buy my next property. I was appalled with their service and the way they treated me, . .more dispite taking up the issue with their senior management (who promised to investigate and would get back to me - still waiting...) was offered prime less 0.2%. On the other hand, the efficient folk at ooba was able to facilitate and secure me a loan from FNB, ABSA and Nedbank all at interest rates significantly more favourable than Std Bank. The service I experienced from ooba was top class. I was Std Bank's customer! Now I am comfortable within the FNB family. . .less by I was Std Bank's customer on September 17 2009, 18:52 Find this comment inappropriate? Report it

WHY DON"T THE BANKS DO ALL THE RESIDENTIAL WORK THEMSELVES? Surely it would be pretty simple for the banks to have a small residential property sales one-stop-shop desk/office facility? That way they could sell and finance the ENTIRE operation from initial listing,financing, transfer, the whole . .more tuti. Makes sense to me. . .less by ER on September 17 2009, 20:57 Find this comment inappropriate? Report it

If you want loyalty buy a dog Im always amazed at how "loyal" customers are outraged when they dont get the rate they "deserve". Maybe you have been a customer for 30 years but this does not necessarily make you worth anything to a bank. Their poor service is a hint that perhaps you . .more should start seeing other people Loyalty be damned - its just a friggin mortgage -take the one that's cheapest for you. Its not like bankers sit and cherish your warm fuzzy loyalty - you are customer 5673874 and you owe them x amount plus interest. They owe you a statement every month. If your "love" is unrequited then look for another bank but consider too that you may not be as special to your bank as you thought you were. . .less by Unsentimental on September 17 2009, 22:40 Find this comment inappropriate? Report it

Its all in the cycles Every business experiences the Gompertz curve of investment, uplift, liftoff, maturity and decline. The mortgage origination industry in SA and the world over has a role to play in creating competition amongst banks to compete for . .more business. Ooba's (and the MO industry in SA) busines model is now in a period of decline after a wonderful period of superprofits. If I was Saul I would be considering getting rid of the fat that inevitably develops during the good times - and then re-thinking the pricing strategy. A sustainable business would be one that charges a modest upfront fee - say 0,75% - and a trailer - say 0,25%. The trailer is obviously not payable when the client settles early or goes into default. Competition has now arrived in the origination industry and they need to adapt much the same as the banks needed to when competition arrived at their door. Good luck guys - but from now on - we all work harder for less. . .less by Observer on September 18 2009, 01:14 Find this comment inappropriate? Report it

@Dave About 10 years ago when Originators did not exist below prime interest rates were unheard of and if you got prime you were extremely fortunate. Before the financial crisis started Originators got up to prime less 2%, work the saving out on that over 20 . .more years and you worried about a once off commisssion banks pay Originators which works out to be a pittance compared to the saving over 20 years. Oh and bright spark do you honestly think you are getting any of the saving the banks make by not paying the Originators' commission? Bank's already high profit margins will only get higher and your bond will be costing you the same (if you manage to match the Originators' rate) whether you went through an Originator or not. So when you move out of your folks house one day 'skattie' and decide to buy your own home be my guest and go and do all the leg work of obtaining all the supporting documents and standing in line to apply at all the banks and deal with the call centres and attorneys yourself when you could have let someone else do it for you at no cost and more than likely at a better rate. So decide whether you would like to make the banks richer or pay commission to Originators who provide better service than bank employees and create competition and better service levels from the banks! . .less by Originator on September 18 2009, 08:58 Find this comment inappropriate? Report it

that's like using an intermediary to purchase a car! it's a waste Bond originators can only ultimately push up the cost of home ownership. add to this estate agents commission and we see price inflation of 10% - financed over 25 years, so the total is massive! by GungetsTuft on September 18 2009, 08:59 Find this comment inappropriate? Report it

@ER The banks could everythin in-house but you have to realise their risk would be much higher, even though they would make more profit they would have to employ specialised people for this department and would have to pay salaries every month regardless of . .more their turnover. You must realise banks only pay out commission to originators for deals that are approved, therefore if the deals don't go through (recently decline rates peaked at 80%) it does not cost them anything. The property market was booming before the financial market crashed, can you imagine how much staff the banks would have had to employ to keep up with the demand and how much it would have cost them after the markets crashed and the bond applications dried up and approval rates dropped? They would have had to retrench thousands of staff members and pay out millions in retrenchment packages. . .less by Originator on September 18 2009, 09:11 Find this comment inappropriate? Report it

Why bank cannot do it themselves All the banks used to have specialist home loan consultants that chased the process, did the forms and acted as the liaison with their respective home loans departments which are no more than factories. `Then came the efficiency consultants, the Bain & . .more Co, McKinsleys and all of the business school cost cutting fraternity. The banks retrenched or allowed all of these specialists that did really good jobs to leave. That's when it got interesting because there branch staff were not trained to pick up the slack. Opened the marked for second tier financiers and private banks that offered the service to rape the BIG BOYS home loan books of all the quality lending that had been priced too high. Enter the housing boom. No competent staff in the banks to deal with the volume. Originators and estate agents simply filled the void left by bad decision making to get rid off the staff in the first place. Now the markets slipped and they are under pressure from bad margins on these deals. They cannot afford the origination fees and give concession rates to the bond holds. UNDERSTAND THE HISTORY AND THE MECHANICS BEHIND IT, AND YOU UNDERSTAND WHY THIS IS NOW HAPPENING. GREED ARROGANCE AND STUPIDITY, A LETHAL COMBINATION IN BANKING . .less by @er on September 18 2009, 09:32 Find this comment inappropriate? Report it

@Originator Skattie, I own 5 properties, each financed by way of a bond, did not use a originator's "services" on any of them and will not use one ever. To state that we must accept your exorbitant commissions as being without you does not translate into savings for . .more clients, are simply ridiculous. The banks are working you out of the system as I type this precisely because your extravagant fees are hurting their profit margins, which in turn, is passed on to the consumer. Judging by the comments above, it is clear that the majority of opinions does not support you. The banks have realised that you are ripping them (and consumers) off and your glory days are numbered. Go quietly from whence you came and try your luck somewhere else. . .less by Dave on September 18 2009, 10:13 Find this comment inappropriate? Report it

@ Dave Standard Bank may be trying to work out Originators but the other banks see the value Originators bring in building their mortgage books and getting their products out in the market in real time. Originators will be around for a long time to come albeit . .more at lower commissions and perhaps with the introduction of trailer commissions. As for you enjoying the benefits of working out the Originators' commissions, don't think you will be alive to enjoy that day. By the way it has been more than 6 months since Originators' commissions were slashed by at least half, have you enjoyed any drop in fees or interest from the Banks??? . .less by Originator on September 18 2009, 10:52 Find this comment inappropriate? Report it

ooba drop kicked off the Atlantic Board into the chilly sea ooba the largest MO in SA?? Please, they are a close third maybe, and dropping all the time. (ask about how they ran their R50m acquisition of LoanLink into the ground in just under a year...way to go Saul!) The loss of their STD contract should render . .more them more or less worthless by mid-2010...as for those estate agencies running the anti-competitive cartel (otherwise known as ooba) do yourselves a favour and find another partner...ooba's days of ruling by fear and terror are over. . .less by Uber-Bull on September 18 2009, 11:09 Find this comment inappropriate? Report it

@Originator I am afraid that we will have to agree to disagree as you have failed to provide me with any tangible evidence whatsoever that you provide an essential service. I respect your right to make a living but I do not agree with the fees that you charge for the . .more work that you do. Please be honest with us and with yourself, and accept that the fees you received in the past was simply not comensurate with the work you did, especially on higher bonds. Untill your fees are in proportion to the "service" that you render, you will remain in many people's eyes, alas, nothing more that opurtunists par excellence. I rest my case. . .less by Dave on September 18 2009, 11:25 Find this comment inappropriate? Report it

@Originator It IS cheaper to go directly, the bond originator offered me prime -1.2 went direct to the bank and got prime -1.4 by Prime minus on September 18 2009, 11:57 Find this comment inappropriate? Report it

I negotiated myself... cause I am normal!!! I applied separately to all four banks. And from there, I negotiated the best rate (prime -1.9%)!!! I agree with Dave, there is NO tangible evidence of what originators can offer. I did all the follow ups myself and found no problem. All the banks tracked . .more my app on their system. In 3 days, I had the best rate from FNB! (My now ex bank ABSA, whom I banked with fo 10 years, had only offered me prime less 1.3%). Yet a strange bank offered me much more??!?!? Bottom line, originators add value to LAZY people!!! . .less by Saks on September 18 2009, 12:41 Find this comment inappropriate? Report it

Saks you did the right thing you found the best deal but dont hold it against ABSA -obviously they just aren't that in to you despite the 10 years you have spent together. The only thing that counts is how low the rate is - all the other "service" offerings are just twaddle. by Unsentimental on September 18 2009, 14:15 Find this comment inappropriate? Report it

Originators I am not an originator or a bank official. It amazes me to see the total ignorance of how origination works. Firstly the rate is no better if you go direct. Secondly the time you would spend on negotiating, filling out different information requests, . .more dealing with diffrent policies etc. would probably cost more than the originator receives. Have any of you professors worked out what your time costs and how much of it would be spent on the process. You live in cloud cuckoo land if you believe your bank costs are high because of originators they were already like that before them and have increased by percentages that would have been in place regardless. By the way as stated who with a Standard Bank bond has had a drop in charges because of no originators. In the financial market any intermediary is a cost saver and the major benefit gained is that they no what to ask for what to present and which questions to preempt hence reducing time and increasing approval probability. Please wake up outsourcing is the way to go on everything . .less by Tom on September 21 2009, 09:40 Find this comment inappropriate? Report it

Originators - why we should thank them Like Tom, I'm amazed by the ignorance displayed in many of these comments. I've been investing in property for close on 30yrs, so let me give some of you a brief history lesson. Bond origination has only been going in this country for about 10yrs. Prior . .more to that, bond applications required you to go to each bank individually to apply. Meaningful rate concessions hardly existed. Banks could safely rely on the "hassle factor" to stifle price competition. The introduction of originators meant that suddeny buyers had easy access to multiple bank applications and hey presto, meaningful rate concessions suddenly started spilling out from all the banks! For that alone, all property buyers should be grateful - the originators forced the banks to actually compete for our business. Thankfully too, the market in SA functions that there is no cost to the buyer for using an originator - different to many countries overseas where you have to pay a fee to make use of origination. Again, it is in our interests that this remains the case. If you're advocating going direct to the banks, why bother? The banks don't pass on savings they make by not paying an originator to you - trust me, as an experienced investor, I've tried this argument many times. Keeping origination strong forces banks to compete. That's good for us consumers! . .less by Property Investor on September 23 2009, 09:44 Find this comment inappropriate? Report it

@Unsentimental Ha Ha, couldn't agree with you more... by Dave on January 03 2010, 07:55 Find this comment inappropriate? Report it

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