Figure Technologies closes first rated HELOC securitization

Figure Technologies, the blockchain-focused financial technology firm, announced its first asset-backed securitization of home equity lines of credit, underwritten by three investment banks.

The securitization FIGRE 2023-HE1 consists of Class A and B notes with ratings of AAA and A (low) from DBRS Morningstar. Jefferies, Goldman Sachs and JPMorgan Chase served as underwriters for the transaction, one of the few publicly rated HELOC securitizations since the Great Recession.

"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," Figure CEO and Co-founder Mike Cagney said in a press release.

The notes are backed by 3,568 loans with a total unpaid principal balance of $236.8 million and includes Figure's own originated loans, as well as smaller numbers of HELOCs from Homebridge Financial Services, Movement Mortgage, Guaranteed Rate and others, according to Morningstar. Loan seasoning averages three months but ranges from one to 13 for the entire portfolio. All loans are current, with only one listed as nonperforming at any point since origination.

The launch comes just weeks after the Mortgage Industry Standards Maintenance Organization announced it intended to form a workgroup dedicated to examining and streamlining the HELOC electronic closing process. 

In its call for working group participants, MISMO noted the variation of terms held within HELOC electronic promissory notes, making document standardization essential for "increased interoperability" to ease trading.  

The San Francisco-based fintech's transaction is at least the second HELOC-backed securitization issued in the past six months, after home equity loans garnered greater borrower interest throughout 2022. In December, Achieve Loans issued a publicly rated securitization worth $175 million.

An advocate of increased blockchain utilization within mortgage trading, Figure has previously transferred eNotes as nonfungible tokens using technology it helped create. 

As interest rates accelerated last year and removed refinance incentive for most borrowers, HELOCs accounted for larger shares of origination volumes, with homeowners seeking to tap into their accrued equity, which grew by an average of $270,000 since the start of the pandemic, according to CoreLogic.

HELOCs accounted for 21% of total home loan activity in the fourth quarter, increasing from sub-5% at the beginning of 2022, while the number of originations grew to 313,973, up 32% year over year, real estate data provider Attom said. 

Through the end of 2022, Figure had originated more than $5 billion in HELOCs for more than 70,000 households, it claimed. The number would make it the largest nonbank HELOC originator in the country. The company also partners with several mortgage lenders, offering a white-label platform permitting them to originate HELOCs to their customers.