Figure Technology Solutions has announced a blockchain-based home-equity line of credit securitization that it says is the first to receive a AAA rating from a major rating agency, broadening its investor base.
S&P involvement in the latest securitization allows more AAA investors who require one of the "big three" players to rate the bonds before they'll buy them. S&P looked for strong loan performance indicators and operations in rating the deal.
"There are investors whose mandate is not to buy unless there is at least one triple-A from a major and so in doing so, we've increased liquidity and lowered costs for our marketplace," Figure CEO Michael Tannenbaum said in an interview.
(Fitch and Moody's are the other two majors.)
The securitization was oversubscribed and drew over 30 unaffiliated buyers, including insurers and asset managers. Around 15 were AAA investors.
All the collateral came from
"Because we use blockchain, we do things a little bit differently. So It's a big deal to get a rating agency like an S&P to give a triple-A to that process," Tannenbaum said.
S&P noted that among the features of the transaction is the use of a "proprietary digital lien matching process using third-party data sources to determine previous lien amounts and to determine lien position" as a title insurance alternative.
HELOCs in the deal, which are fixed-rate products that reset when a draw is made, are secured by a mix of both first and subordinate liens. S&P made adjustments in its ratings based on the absence of title insurance for first liens in the pool. First-lien HELOCs constituted just 70 of the 4,368 in the collateral pool. The bulk, or 4,090 of the HELOCs, are second liens.
Figure has been involved in HELOC securitization
The previous prefunded transaction followed the formation of a $200 million joint-venture partnership with global investment firm Sixth Street, allowing for a diversification of secondary market strategies.
"We're basically just trying to add lots of options, lots of liquidity," Tannenbaum said.
