Originator

Definition§

The term “originator” can be broadly defined based on the context in which it is used. There are three primary contexts where the term “originator” is commonly applied:

Mortgage Originator§

In the context of mortgage lending, an originator is typically a bank, savings and loan association, or a mortgage banker that initially creates a mortgage loan that will become part of a pool of mortgages. The role of the originator includes receiving the mortgage application, processing it, underwriting the loan, and closing the transaction.

Securities Offering Originator§

In the realm of investment banking, an originator refers to an investment banking firm that associates with the issuer of new securities from the early concept development phase. The originator supports the issuer throughout the process and frequently acts as the manager of the underwriting syndicate, which is a group of investment banks or other entities that help the issuer of the securities.

Banking Transaction Initiator§

In banking terminology, an originator can also refer to the entity that initiates the instructions for a money transfer. This is usually the party who instructs their financial institution to send a payment to another party.

Examples§

1. Mortgage Originator: Wells Fargo Home Mortgage acts as the originator when a borrower applies for a mortgage loan to buy a house. Wells Fargo processes the loan application, conducts underwriting, and funds the loan, adding it to a pool of mortgages for potential sale.
2. Securities Offering Originator: Goldman Sachs may work as an originator when a corporation decides to issue a set of new bonds. Goldman Sachs helps plan the bond issue, finalizes the terms, and usually serves as the lead manager in the underwriting syndicate.
3. Banking Transaction Initiator: A small business uses Bank of America to initiate payment to a supplier. The business is the originator, while Bank of America processes the money transfer instructions to the supplier’s bank.

Frequently Asked Questions§

Q: What responsibilities does a mortgage originator have?

A: A mortgage originator is responsible for accepting applications, processing them, underwriting the loans, and financing the mortgages. They play a crucial role in ensuring the loan meets both lender requirements and borrower needs.

Q: How does an investment banking firm become the originator of a new securities offering?

A: An investment banking firm becomes the originator by being engaged during the early planning stages, providing necessary support and expertise throughout the issuance process, and often leading the underwriting syndicate once the securities hit the market.

Q: Can an originator be both an entity and an individual?

A: Yes, an originator can be an entity such as a bank, savings and loan institution, or investment banking firm, as well as an individual like a mortgage banker or a broker.

Related Terms§

• Pass-Through Certificate: A financial instrument that represents a stake in a pool of mortgage loans. Mortgage originators pool individual mortgages to create these certificates, which are then sold to investors.
• Syndicate: A group of investment banks or other financial entities that collaborate to underwrite and distribute a new securities offering.
• Underwriting: The process by which an underwriter assesses the risk of a borrower or an investment and determines the terms of the issuance or loan.

References§

• Investopedia - Mortgage Originator
• Wikipedia - Investment Bank
• Federal Financial Institutions Examination Council (FFIEC)

Suggested Books for Further Studies§

1. The Mortgage Originator Success Kit: The Quick Way to a Six-Figure Income by Darrin J. Seppinni.
2. Investment Banking: Valuation, Leveraged Buyouts, and Mergers and Acquisitions by Joshua Rosenbaum and Joshua Pearl.
3. Understanding Bank Financial Statements: A Must for All Bank Directors by Edward J. McMillan.

Fundamentals of Originator: Banking and Finance Basics Quiz§

Thank you for exploring the multifaceted role of the originator through our in-depth guide and comprehensive quiz. Continue to enhance your prowess in banking and finance!