Origination is the process that involves pooling of debt (with different risk-reward profiles) into portfolios, before selling them to to issuers. In other words, an origination is the process of initiating or starting an instrument or arrangement but without being the ultimate issuer (the party issuing it to potential holders/ bearers, etc.)

Origination may also involve creating a loan (e.g., a mortgage loan) and selling it to another party against origination fees. This process (loan origination) usually gives rise to a derivative product of a specific type: a security or product that derives its performance (cash flows) from that of another (e.g., mortgage-backed securities, MBSs).

As compensation for all the functions carried out by a lender (including application processing), a certain fee is charged, expressed as a percentage of the loan amount- e.g., 0.5% or 1%). Origination fees may also be determined based on mutual negotiations between the parties involved. However, lenders may pass on such fees or part thereof to the borrowers in the form of a higher interest rate over the life of the loan.