Kara specifically states she was born a herm when asking about her past in KaraQuest 2. Also, the line "statistically significant occurrence of hermaphroditism" is in the "Sexes" part of the beginning of the codex, not history or society and culture, implying natural occurrence as opposed to mass modding. The character creation is, or at least appears to be, choosing from naturally occuring genetics from the mother's race. Even if herms are a mutation, they appear to be one that can easily occur, like how red hair is one in humans.