An originator is a person or entity who is the primary source of financing. For example, if someone receives a mortgage from Big Bank Incorporated, that bank would be the originator of the loan. Big Bank Incorporated could in turn sell the mortgage to another financial institution, but it would still be on record as the loan originator. Originators can offer many types of loans and credit to people who need access to funds for everything from paying for college to starting a business.
Loan originators have a number of responsibilities under the law. They are expected to use due diligence when evaluating loan applications to confirm that an application is a suitable candidate for a loan and to gather supporting information. The loan originator determines how much money the applicant is eligible to receive and makes a decision about the terms to offer. The terms may include a higher interest rate for a riskier loan and other measures which are intended to protect the originator.
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When someone applies for a loan, the originator may be approached directly, or arrangements may be made through a broker or representative. In either case, the borrower must provide supporting documentation and fill out paperwork which is used to create a file which can be evaluated by a loan officer. It is important to keep records pertaining to a loan originator so that borrowers know who was responsible for originating the loan and who to contact in the event of a problem.
In order to act as a loan originator, it is usually necessary to be certified by the government. The government confirms that a company has the capability to offer loans and ensures that the company is familiar with the rule of the law when it comes to writing loans. People who work at loan originators are provided with extensive training so that they provide appropriate services to customers including fair information about the terms of the loan, accurate representation of limitations on the loan, and so forth.
This term is also sometimes used to refer to the lead party in an underwriting syndicate. When companies make new issues of securities, whether they are just going public or providing additional issues, they work with underwriting forms which provide financing and assistance so that the company can sell the securities. The originator is the firm which works directly with the company and organizes the process of developing the issues, marketing them to investors, and selling individual shares to investors who wish to buy stock.