Figure powering HELOCs for 4 more independent mortgage banks

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Figure Technologies Inc. continues to solidify its title as the nation’s largest non-bank provider of home equity lines of credit (HELOCs), announcing partnerships with four new major lenders Wednesday.

Figure, founded in 2018 by SoFi veteran Mike Cagney, says its technology will power a branded HELOC product for four top 20 independent mortgage banks — CMG Financial, CrossCountry Mortgage, Fairway Independent Mortgage and The Loan Store — as private label partners.

Last year Figure announced similar partnerships with Guaranteed Rate, Homebridge, Synergy One and Movement Mortgage, and the company now says it’s provided more than $6 billion in HELOCs to about 85,000 households.

Jackie Frommer

“These partnerships with leading independent mortgage banks enable Figure to provide more U.S. customers with HELOC offerings to help them meet their life needs,” Figure’s Head of Lending Jackie Frommer said in a statement. “In an economic environment in which mortgage volume has slowed, and traditional banks are withdrawing from the mortgage space, Figure’s HELOC provides originators with a valuable new opportunity to deepen relationships, capture new clients, and drive lending officer engagement.”

San Francisco-based Figure has also begun working with wholesale lenders who want to provide HELOCs like Columbus, Ohio-based Go Mortgage, having launched a wholesale lending platform in June.

Competitors in the home equity lending space include not only traditional banks but a new crop of fintechs offering shared equity products and direct lenders like Rocket, which rolled out home equity loans for debt consolidation last year.

While Figure is proving to be an innovative provider of HELOCs, it’s also dipping a toe into the world of purchase mortgages. In November, Figure announced the launch of its partnership with a new startup, Ready Life, which offers mortgages to borrowers who don’t have credit scores but have established a track record of paying their rent on time using the company’s Ready Pay Visa Debit Card.

Figure is securitizing its blockchain-powered HELOCs

Borrowers applying through an entirely digital HELOC application process can be approved in as little as five minutes, Figure says, and the company is able to serve homeowners in 45 states and Washington D.C., up from 41 states a year ago.

While HELOCs have traditionally been offered by banks that hold the loans in their portfolios, Figure is packaging its blockchain-powered loans into securities that are sold to investors. That’s the ultimate source of funding for most U.S. purchase mortgages, but those loans are usually backed by Fannie Mae or Freddie Mac or insured by FHA or VA loan programs.

“Figure’s HELOC product provides a unique risk-adjusted offering with the credit protection of a secured mortgage product and attractive yields, establishing it as an asset class that bridges the residential and consumer finance industries,” the company said in announcing Figure’s first-rated HELOC securitization in April.

The securitization of 3,568 loans with a total credit limit of up to $246.2 million was comprised of Class A and B notes rated AAA and A (low) by DBRS Morningstar. Figure had previously contributed HELOCs to two unrated securitizations in 2020 and 2021, DBRS said. Those securitizations were sponsored by Saluda Grade, and their “performance to date is satisfactory,” the rating agency said.

Mike Cagney

“Launching this rated transaction is an inflection point in capital markets, ultimately supporting more liquidity to U.S. homeowners,” Cagney said in a statement. “The partnership with our underwriters underscores a continued level of institutional interest in Figure and provides the foundation for what we believe will be a rapid rise in blockchain adoption within traditional finance.”

According to DBRS, Figure originated most of the loans in its latest HELOC securitization with help from “white label” partners, including Homebridge Financial Services Inc., Movement Mortgage and Guaranteed Rate.

The loans were mostly made to borrowers with prime and near-prime credit “who seek to take equity cash out for various purposes,” DBRS said. Compared to other HELOCs DBRS has rated in the past, the loans in the pool have a shorter draw period and are all fixed-rate, fully amortizing loans.

With an unpaid principal balance of $236.7 million, the loans are fully drawn at origination, with every new credit line draw considered a new loan with a new fixed interest rate. In addition to having a shorter draw period, the loans “may have terms significantly shorter than 30 years, including five- to 10-year maturities,” DBRS noted.

Figure will service all the loans in the pool and earn a servicing fee of 0.25 percent per year in return.

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