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- HEIs provide another way for homeowners to tap into their equity without the monthly repayment obligation required by home-equity lines of credit.
Point, a financial technology platform that allows homeowners to unlock home-equity wealth, and Redwood Trust Inc. have completed the first securitization backed entirely by residential Home Equity Investment (HEI) agreements, issuing approximately $146 million of asset backed securities, the companies said today.
The transaction, Point Securitization Trust 2021-1, closed Sept. 23. Co-sponsoring the transaction with a subsidiary of Redwood, Point originated all of the HEIs in the securitization and will continue to service the assets, the company said.
The securitization is structured as approximately $120 million of unrated senior class A-1 securities and approximately $26 million of unrated class A-2 securities. Nomura Securities International Inc. was the sole structuring agent and bookrunner for the issuance.
“Homeowners across the country are turning to Home Equity Investments in record numbers to unlock more than $20 trillion in illiquid wealth tied up in their homes,” said Eddie Lim, co-founder and CEO of Point. “This first-of-its-kind securitization is a testament to the investments we’ve made in Point’s technology platform, homeowner education, and seamless execution.”
CoreLogic’sHomeowner Equity Report in September reported that U.S. homeowners with mortgages gained a total of $2.9 trillion in equity in the second quarter of 2021, or an average of $51,500 per borrower.
Lim said that by providing liquidity to existing investors and access to HEIs for new investors, “the securitization will be instrumental in making it possible for Point to help more homeowners improve their financial health.”
Before this securitization, investors relied on fund vehicles and forward-flow purchasing agreements to deploy capital in the HEI asset class. This securitization’s structure signifies greater liquidity for issuers and unique access to assets for end investors.
“We are excited to co-sponsor the first Home Equity Investment securitization,” said Bo Stern, head of Portfolio Strategy and Risk for Redwood Trust. “This inaugural transaction opens a new door for investors to access one of the largest investable markets in the world, while enabling homeowners to participate in the benefits of home-price appreciation without having to sell their homes.”
HEIs are an important new type of shared-equity financing for homeowners and have gained traction in recent years. Homeowners ascribe value to not facing a monthly repayment obligation, as they would with a home-equity line of credit, and the risk-sharing structure allows investors and homeowners to share in home-price changes. Housing economists have advanced the case for HEIs as drivers of housing finance stability for many years.
Redwood Trust is a specialty finance company focused on several distinct areas of housing credit and providing liquidity to growing segments of the U.S. housing market not served by government programs.