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Third Party Origination

Definition - What does Third Party Origination mean?

Third party origination refers to a process, usually involving mortgages, where there is a third party who is finalizing the mortgage. Almost always, the third party works closely with the lender rather than the borrower. Typically, the borrower will sell the mortgage to a mortgage loan seller (the third party) who will then package the mortgage together with other mortgages and attempt to sell them on the open market.

Justipedia explains Third Party Origination

Third party origination has received a lot of scrutiny over the past decade or so, especially in places such as the United States and Iceland who suffered serious financial crisis due to unregulated third party origination structures in the banking systems. Third part origination is so harshly criticized because it turns lending money for necessary items such as houses and cars into a money making enterprise that was heavily unregulated. This allows these third parties to focus only on making money without looking at the consequences their actions could have on the original borrower and lender.

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