Lendi cuts mortgage broker commission tiers, yet to lodge 2024 fiscal accounts

CBA-backed mortgage broker Lendi – owner of Aussie Home Loans – has cut its tiered commission structure for its own brokers, a move likely to inflame strained franchisee relations.

Lendi, led by CEO David Hyman, is yet to file its 2024 fiscal accounts with ASIC.

Commonwealth Bank-backed mortgage broker Lendi has cut its tiered commission structure for its own brokers, in a sweeping move that is likely to inflame already strained relations with franchisees.

The Australian understands that brokers and franchisees – the majority of which operate under the Aussie Home Loans brand – were informed of the new commission structure early this month, alongside the introduction of a fixed monthly fee which replaced a host of other charges. Sources said for brokers writing up to $1.99m in loans the upfront commission received from the parent entity Lendi drops to 60 per cent from 75 per cent previously, while some of those writing $2m to $4.5m in loans would see a cut to 75 per cent from 80 per cent.

Essentially for those tiers of brokers caught by the change, Lendi will keep a larger share of the commission that banks pay when a broker introduces a loan. Banks typically pay brokers a 0.65 per cent commission on the drawn home loan amount upfront, and trail commission of 0.15 per cent annually.

Because Lendi, which completed the acquisition of Aussie Home Loans in 2021, works on a franchise model it retains some of those commissions through its tiered structure. A Lendi spokesman declined to confirm details of the commission changes on Thursday or explain why the company had not yet lodged its fiscal 2024 financial accounts with the corporate regulator.

“As a business we need to continually evolve our commissions models to ensure they are fit for purpose, in line with market conditions and promote growth within our stores. The last time we did this was 2018,” he said. “We have communicated upcoming changes to the network, which we developed in consultation with the Aussie Franchise Council. These structures are commercially sensitive.”

The spokesman said Lendi would soon file its accounts.

It’s been a turbulent 2024 for Lendi, which has been at loggerheads with a large group of Aussie franchisees since around the middle of the year over the treatment of customer leads and an alleged breach of the franchise agreement by the parent entity. The loss-making company has also remained under financial pressure.

Commonwealth Bank, ANZ’s external venture capital unit 1835i and Macquarie Bank own respective stakes in Lendi, with CBA being the largest of the bank shareholders with about 42 per cent. CBA’s latest annual report, made public in August, showed the bank lowered the valuation of its stake in Lendi to $240m as at June 30, down from $366m a year earlier.

That also came as CBA and other major banks doubled down on selling home loans via their own channels rather than through brokers.

In June, Lendi lodged a deed of cross guarantee with the Australian Securities and Investments Commission, which suggests it may be relying on relief from the regulator regarding the lodgement of financial accounts. The cross guarantee covers a number of entities including one called Digital Home Loans, meaning the regulator can treat them as one corporate unit.

Lendi’s after-tax losses swelled to $92.3m for the 12 months to June 30, 2023, from almost $2.5m in the prior year, the latest available accounts lodged with ASIC show. The disappointing results were attributed to a challenging operating environment and markedly higher official interest rates, while those accounts also said the fiscal year represented a peak for merger integration costs.

Unaudited underlying earnings before interest, tax, depreciation and amortisation – which is adjusted for lumpy items and one-off restructuring costs – fell to $20.5m, from $55.3m in the prior financial year.

Lendi also appears to be shifting to a greater focus on the Aussie brand across its network, which suggests a lesser reliance on the former’s brand across its mortgage broking operations.

A recent email to brokers sighted by The Australian said Lendi had conducted an initial trial in South Australia which showed “promising results”, including an increase in the acquisition of new customers.

“In the quest to maximise the impact of our marketing spend and customer proposition, we are contemplating a move towards a primary-broking brand,” it said. “The move aims to streamline operations, deploy more marketing budget to the Aussie brand and ultimately provide more customer opportunities for all brokers.”