Key Takeaways:
– Redwood Trust and Point have closed on a $139 million bond secured by 1,577 home equity investment (HEI) contracts.
– This is the first-ever securitization backed entirely by HEIs in 2021.
– Point closed on its first bond issuance rated by DBRS Morningstar, with one tranche rated single-A and the other rated triple-B-minus.
– Point expects to complete several bond deals per year.
– Unlock Technologies and Saluda Grade completed the first-ever securitization rated by DBRS Morningstar in October.
– The rating of these securities is expected to attract new pools of capital to the HEI asset class.
– Redwood sees this securitization as a milestone to provide more liquidity to the space and assist more homebuyers.
– Only 50% of homeowners can tap into their home equity, despite Americans sitting on approximately $32 trillion in home equity.
– Nomura Securities International Inc. was the sole-structuring agent for the issuance.
HousingWire:
Redwood Trust and home equity fintech lender Point have closed on a $139 million bond secured by 1,577 home equity investment (HEI) contracts.
The two companies issued the first-ever securitization backed entirely by HEIs in 2021, a bet that rising home-price appreciation can benefit consumers in the short-term and investors in the long-term.
Point closed on its first bond issuance rated by DBRS Morningstar on Oct. 31. One $117 million tranche of the bonds has a single-A rating while the other at $22 million has a triple-B-minus rating.
“The financing of HEIs through the development of a liquid and efficient market for rated HEI bond issuance will prove to be a pivotal moment in housing finance, one that will bolster both homeownership and overall financial health in this country,” Eddie Lim, co-founder and CEO of Point, said in a statement.
Meanwhile, Eoin Matthews, co-founder of Point, told The Wall Street Journal that the firm expects to complete several bond deals per year.
In October, Unlock Technologies, another home-equity investment firm, and Saluda Grade, a private real estate investment firm, completed the first-ever securitization rated by DBRS Morningstar.
The rating agency, which was the first to provide a rating for the asset class, published a new methodology for HEIs in July 2023. Unison, another HEI firm, is working on its first deal, too, The Wall Street Journal reported.
The rating of those securities is supposed to attract new pools of capital to the HEI asset class, such as insurance companies and money managers who are restricted to investing in rated investment-grade securities.
Redwood sees this securitization as a major milestone to provide more liquidity to the space, allowing HEI companies to assist more homebuyers. While Americans sit on approximately $32 trillion in home equity, only 50% of homeowners can tap into that wealth.
Nomura Securities International Inc. was the sole-structuring agent for the issuance.
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Property Chomp’s Take:
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The idea behind this bond is that rising home-price appreciation can benefit both consumers and investors. Point, a home equity fintech lender, closed on its first bond issuance rated by DBRS Morningstar. The bonds have different ratings, with one tranche rated single-A and the other triple-B-minus.
According to Eddie Lim, the CEO of Point, this move will be a pivotal moment in housing finance and will boost homeownership and overall financial health in the country. Eoin Matthews, co-founder of Point, even mentioned that the company expects to complete several bond deals per year.
But Point isn’t the only player in this game. In October, Unlock Technologies and Saluda Grade completed the first-ever securitization rated by DBRS Morningstar. This rating agency was the first to provide a rating for the HEI asset class and published new methodology for HEIs earlier this year. Unison, another HEI firm, is also working on its first deal.
The rating of these securities is meant to attract new pools of capital to the HEI asset class, including insurance companies and money managers who are restricted to investing in rated investment-grade securities. This is a big deal because it allows HEI companies to assist more homebuyers. Did you know that Americans have about $32 trillion in home equity, but only 50% of homeowners can actually tap into that wealth? This securitization could help change that.
Nomura Securities International Inc. acted as the sole-structuring agent for this issuance. It’s exciting to see how this bond will bring more liquidity to the HEI space and help homeowners access the wealth they have built in their homes.
So, that’s the scoop on the $139 million bond secured by 1,577 HEI contracts. It’s an important milestone for the housing finance industry and has the potential to benefit both consumers and investors. Let’s keep an eye on how this develops and see if more companies follow suit in the future.
