What is an aggregator in mortgage broking?

Aggregators in the mortgage broker sector essentially serve as a funnel for leads, allowing brokers to decrease their risk exposure with secured investments. Additionally, aggregators offer a variety of business resources and marketing materials to help mortgage brokers succeed.

But what does that actually mean in practise?

Volume is the name of the game for mortgage brokers. The more loans applications you convert, the more commissions you’ll earn. But trying to manage a high volume of loans can be overwhelming and cost prohibitive for many small businesses, especially those brokers just breaking into the industry. Before you even reach that point though, you’ll need to find the leads to create a high-volume portfolio of clients and commissions.

This is where aggregators come in. Also known as mortgage dealer groups or mortgage franchise groups, aggregators are accredited loan-writing businesses that provide brokers with access to a lender panel and securitised mortgage options. They subsume a large part of the initial administrative costs of originating loans, and are able to negotiate better commission terms due to the bulk volume of loans.

This makes working with an aggregator a popular model for both brokers and lenders. According to Finni, while 39 per cent of brokers working as sole operators have one loan writer, this number dips down to 18 per cent at two loan writers. This trend of decreasing loan writers continues up to eight through ten loan writers, where it drops to 1 per cent of brokers. However, at eleven or more, the percentage jumps back up to 18 per cent.

How does the aggregation model work?

Brokers partner with an aggregator that then serves as the middleman for residential loans. Much like the mortgage broker model in general, payments in aggregation also work with either a fee-based or commission split model.

Commission split

The commission split model involves the broker giving the aggregator a percentage of a commission payment. Typically the broker keeps 80 per cent of the commission and the aggregator gets the remaining 20 per cent.

Since the aggregators only earn their cut once the commission payment comes through, brokers don’t have any up-front costs. This makes the commission more enticing for brokers just starting out.

Fee-based model

With the fee-based model, brokers pay a monthly flat-rate fee to the aggregator in exchange for access to lenders. In this model, the more loans you write, the more you can earn, as you won’t have to pay out commissions on each individual mortgage. But if you’re not writing enough loans per month to exceed the flat-rate fee, it might not be beneficial to your circumstances.

Both models have their benefits, and you should crunch the numbers and weigh all the factors to determine which one best suits your business if you choose to partner with an aggregator.

Additional benefits of mortgage broker aggregators

Providing brokers with access to a lender panel has traditionally served as the main purpose of aggregators in the past. In this role, aggregators significantly minimise overhead costs for mortgage brokers to verify businesses and loans. This makes the loan process more manageable and profitable for both brokers and lenders.

Over time though, aggregators have expanded their services and now also offer up a wide range of benefits specifically designed to assist brokers in finding success. These member benefits include:

  • Training and mentoring.
  • Education.
  • Compliance.
  • Marketing/promotions.
  • CRM system.
  • Loan comparison platform.
  • General business support.
  • Back-office administration.
  • Much more.

Beyond this, aggregators also help brokers navigate the complex framework of credit regulations and compliance issues.

Which aggregator should you choose?

Deciding on the right aggregator for your mortgage broker business model depends on a host of variables. Each broker will have their own specific priorities, resources, and goals, so it’s important that you find an aggregator that meets your requirements.

There are, thankfully, some guideposts you can follow no matter which stage you are in building your mortgage brokering business. One such marker is to consider an aggregator with many member package options available. With more options to choose from, you stand a better chance at finding the one that fits your needs.

Another marker to look for is a cost-effective aggregator with reasonable up front fees and flexible ongoing fee structures. As you grow your business, you might discover you are writing more loans, and that a fee-based structure might make more sense than a commission model.

Further, both brokers just getting into the industry and long-time veterans alike should strongly consider partnering with an aggregator that provides high-quality mentorship and business guidance. When you’re just launching your new career and even before you start, you’ll no doubt have a hundred questions. For industry veterans, there’s always room for improvement and gaining new insights, in addition to new laws and regulations to learn about. This makes mentorship a crucial aspect for aggregators.

Click here to learn more about how working with an aggregator can improve your mortgage brokering business.