Figure unveils new DSCR lending platform

Figure Technology Solutions has introduced a new platform for debt-service coverage ratio originations aimed to support growth of nonqualified mortgages as well as the company's own blockchain-based marketplace. 

The fintech's lending platform aims to provide quicker access to capital for real estate investors, utilizing artificial intelligence and blockchain technologies to streamline underwriting and funding for mortgages based off of property cash flow. Along with the rollout, Figure also announced the DSCR platform's first two embedded broker lending partners, West Capital Lending and Axen Mortgage. 

"This launch shows the power of combining AI automation with blockchain standardization to eliminate the friction that has slowed DSCR lending for years," said Anthony Stratis, vice president, lending partnerships at Figure, in a press release. 

The New York-based fintech claimed the new platform has the ability to shorten processing times for DSCR originations between application and funding to as few as five days — a reduction of 80% of more from the current 21-to-30 day average — thanks to proprietary technology that can replace manual underwriting review. AI-backed automation will also lower costs of origination by as much as 80%, it said. 

The company also designed the platform that will serve brokers, lenders and investors to provide fraud prevention and achieve savings through scale, Stratis said.

Along with artificial intelligence-assisted underwriting, the DSCR platform also employs optical character recognition for document review, automated valuation models for refinance loans below the $400,000 threshold and proprietary rental income verification technology. 

Figure's existing lending partners can add DSCR lending through application programing interfaces, it added.  

Eric Hines, co-founder of West Capital Lending, said that his company signed on to the platform because Figure's automated approach fit in with its practice of backing companies "that are reshaping financial services with technology."

Growth of the non-QM market

The new launch comes as the segment of the market where DSCR loans fall under enters an expected expansion period, industry leaders have frequently said. 

Securitization data from Morningstar DBRS showed non-QM activity ahead of 2024's pace through the first half of the year, with growth likely to continue through the final two quarters. Potential changes on the regulatory front could also provide momentum going forward. 

Along with DSCR transactions, the non-QM sector also includes bank statement loans and other financing for borrowers with nontraditional incomes, lending to consumers with little or troubled financial histories, and several other types of non-standard mortgages.

Between 2019 and 2022, the share of DSCR loans grew from 22% to 50% of total non-QM mortgage-backed securities, according to private lending platform Baseline Financial Technologies. Such loans are based on the projected income from a rental property relative to the debt incurred. They may be used to finance investment units turned into traditional single-family rentals, and the mortgages also attract interest from business owners looking to offer them as short-term vacation properties.

Figure, which went public in the third quarter this year, has long been an advocate of blockchain technology and employs it in private credit trading. The company is behind the development of DART, or Digital Asset Registration Technologies, the platform that allows companies to file their loans on the system and expedite electronic promissory note sales in the secondary market.