Aggregators show their wares

Two mortgage aggregators have launched campaigns to sign up brokers, offering deals they hope will attract independent loan writers who are reviewing their business models in the lead-up to the new National Consumer Credit Protection regime.

The group behind lender Homestar has launched an aggregator called Licensed Finance Brokers of Australia, offering what it claims are the lowest broker fees in the market and an opportunity for brokers to earn equity in the aggregator.

The aggregator LoanKit, which was bought by Mortgage Choice last December, has been relaunched with a "compliance in a box" service that has been designed to allow brokers to maintain their independence and flexibility by becoming licensees rather than credit representatives under NCCP, but have most of the compliance work taken out of their hands.

LFBA managing director Julian Mitton said the group was in the process of signing up "thirty or forty" brokers and had a temporary arrangement with Firstfolio to use its supplier agreements with its lending panel. LFBA also has its own branded loans.

LFBA is charging brokers a flat fee of $390 a month and allowing them to keep 100 per cent of the lender's commission. Most aggregators take between 10 and 20 per cent of the commission.

Mitton said the group would allocate between 50 and 75 per cent of LFBA's equity to brokers, who can earn equity by meeting sales targets and by introducing new brokers to the group.

Mitton said: "We are going to give business value to brokers that can only get it now by selling their loan books at discounted prices."

Mitton said value would be realised through an initial public offering or sale. He is hoping to have 1000 brokers working with LFBA in three or four years' time.

LoanKit head Kym Rampal said the group had 106 brokers on its books and was targeting 250 by the end of the year. He said brokers were looking for more than the usual services offered by aggregators - a panel of lenders, a front end and a commission payment service.

"As licensing approaches, aggregators are giving their brokers a choice; they can get their own licence or they can operate as credit representatives and the aggregator will handle the compliance.

"What we see is a lot of brokers who want to remain independent. For example, they want the flexibility to add lenders to their panel if it suits their business.

"They will operate as licensees under NCCP but they don't want the compliance, training monitoring, reporting and administration burden.

"We are offering them compliance in a box, a managed licensee service. There are a number of these services being offered by third parties for around $4,500 or $5,000 a year but we have calculated that we can do it for under $1,000."

LoanKit is also offering a suite of marketing and public relations training modules, broker software and a newsletter service.

Rampal said: "There has been a lot of commentary that NCCP will trigger consolidation in the industry. We think there is still a place for boutique brokers but they are going to need more infrastructure and support. We see that as our role."