Spring EQ agrees to acquisition by alternative investment group

Spring EQ, the Philadelphia-based provider of home equity products and financing, announced it agreed to its acquisition by an alternative investment group  

The lender will merge with Cerberus Residential Opportunities, a global platform investing in residential mortgage securities and assets, in a move that will increase the lender's technology capabilities and provide borrowers more loan options to customers, according to Spring EQ leadership. The buyer is an affiliate of New York-based Cerberus Capital Management, which oversees approximately $60 billion in assets across complementary credit, private equity and real estate. 

"This partnership with Cerberus comes at a perfect time in our journey," said Spring EQ founder and CEO Jerry Schiano in a press release. "The Cerberus team's mortgage expertise, technology capabilities and operational resources will help propel our growth, better positioning us to make an even greater impact."

Schiano, who first launched the business in 2016, will continue to lead Spring upon close of the deal, alongside the lender's current management team. Financial terms were not disclosed. Law firms Dechert and Dentons both served as legal advisors to Cerberus, while Morgan Stanley provided financial guidance. Katten Muchin Rosenman and GreensLedge Capital Markets served as the legal and financial advisors to Spring EQ.

The deal comes as the mortgage industry continues to grapple with reduced business volume resulting from interest-rate shock, leading to greater interest in home equity loan products. The rapid rise of mortgage rates drove refinance volumes down by 86% on an annual basis in the first quarter this year to a record low of 121,000, according to recent research from TransUnion. But HELOANs gained interest among homeowners looking for alternatives to tap into their property value, with newly originated volumes of the products almost double those of refinances. The number of home equity lines of credit, while lower on a year-over-year basis, also exceeded both refinance and HELOAN volumes.

"There is accelerating demand for home equity solutions, and Spring EQ is already a leader in the growing market," said Joe Steffa, managing director of Cerberus Residential Opportunities, of the deal.

"Amid higher interest rates and record levels of untapped residential home equity in the United States, Spring EQ is providing American homeowners a simpler, more transparent alternative to unlocking their value.

The deal between Spring and Cerberus is the latest in a wave of mergers and acquisitions within the mortgage sector since early 2022. It comes after Guild Mortgage announced its acquisition of a lender this week, another in series of purchases it has made in the past several months.  

Investment groups are eyeing lenders as potential acquisition targets as well. In August, New Jersey-based American Financial Resources agreed to the sale of its business to a Colorado fund manager.