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A non-bank lender has announced that it will be changing the way upfront broker commissions are calculated from 12 November 2018 for some of its mortgage products.
Homeloans has announced that, from Monday, 12 November, it will be implementing the Combined Industry Forum’s reform proposal to pay upfront broker commission based on the drawn loan balance, not the total approved facility amount, and net of any offset facility.
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The changes will affect Homeloans’ Ultra Plus products — which are funded by Advantedge — including both new loans and variations.
Effective from 12 November 2018, the upfront commission for brokers writing a Homeloans Ultra Plus product will be calculated based on the drawn loan balance on the fifth calendar day after drawdown, instead of the total facility amount, and net of any linked offset facility.
Likewise, upfront commission for variations involving increases drawn down will be calculated based on the net debt increase on the fifth calendar day after the loan is drawn down, net of any linked offset facility.
Upfront commission for construction loans will continue to be calculated based on the settled limit.
Similar to the changes already announced by NAB and Advantedge, Homeloans has said that if a customer retains funds to be used at a later date, it will pay upfront commission on the subsequent drawdown amount (i.e. on loan funds used after the initial drawdown), net of any linked offset facility, provided the initial settlement occurs after Monday, 12 November 2018, and the subsequent drawdown:
- occurs on or after the sixth calendar day following the initial drawdown date; and
- occurs within 12 months of the initial drawdown date; and
- is for an amount equal to, or greater than, $20,000, up to the maximum loan split limit.
Further, the maximum commission payable for a subsequent drawdown must not exceed the commission that would have been payable if the loan account was fully drawn as at five calendar days after the initial settlement date.
The non-bank lender has said that it will not pay upfront commission for subsequent drawdowns on construction loans, variations, or if the purpose of the subsequent drawdown is not disclosed in the loan application.
Homeloans has also told brokers that there will be a “once-off catch-up payment” in March 2019 for upfront commission on subsequent drawdowns, where it will pay upfront commission on eligible subsequent drawdowns which have occurred between 12 November 2018 and February 2019.
From March 2019, upfront commission payments for eligible subsequent drawdowns will be paid monthly as per the existing upfront commission payment process.
In a statement, the non-bank lender said: “The changes centre around the importance of ensuring customers obtain a loan which is appropriate for their needs in terms of size and structure, is affordable, is applied for in a compliant manner, and meets the customer’s objectives at the time of seeking the loan.
“These changes are in line with the reforms agreed to by the Combined Industry Forum, and align with recommendations of the ASIC Broker Remuneration Review and the Sedgwick report.
“We are committed to ensuring we continue to deliver good customer outcomes — and supporting brokers to do this — and to maintaining confidence in the mortgage broking industry.”
Lenders expected to make changes by the end of the year
NAB became the first major lender to implement the recommendations from the ASIC and Sedgwick reviews, which were backed by the Combined Industry Forum package of reforms, earlier this month.
Its white label brand, Advantedge (which funds Homeloans’ Ultra Plus product), announced the same changes in tandem, and it is expected that several lenders funded by Advantedge will be confirming the commission changes in due course.
The CIF recently hosted an event which further outlined its work on mortgage broking reforms and reiterated that lenders are expected to make the remuneration changes by December 2018.
[Related: Major bank changes broker commissions]
