Unison issues $443 million residential equity agreement securitization

Residential equity agreement firm Unison announced a $443 million securitization that it claims is the largest bond issue of its kind, opening the door for greater investor involvement.

The fintech’s agreements give residents up to 17.5% of their home’s value in cash in an up-to 30-year agreement. In exchange, the firm receives a share of the home’s value. Unison, which offers these agreements to prime-credit homeowners, manages $1.3 billion of these home equity assets through its investment management arm, it said.

“This securitization adds a new component to our investment management arm and adds an important source of capital to fund consumer REAs across the country,” Unison CEO Thomas Sponholtz, the company's founder, said in a press release.

Unison has talked to a wide range of investors regarding its unrated securitization, said Matthew O’Hara, head of portfolio management and research at Unison Investment Management.

“We are in the midst of speaking to ratings agencies about developing a methodology for rating this type of contract,” he said.

Unison’s announcement comes amid skyrocketing home values, which allowed homesellers to nearly double their profits in 2021 as prices soared. Homeowners’ tappable equity increased a record $2.6 trillion last year to a total of $10 trillion, according to new Black Knight research. The firm defines tappable equity as the amount available to mortgage holders to access while retaining at least 20% equity in their homes.

Shared equity products aren’t loans and companies like Unison don’t charge interest, require homeowners to take on debt, or make monthly payments. Homeowners not selling their homes can buy Unison out with the co-investment amount plus, or minus, Unison’s share in the home’s change in value.

Unison last June raised $210 million to fund further co-investments and has several industry veterans on its executive team, including PayPal and eBay veteran Ryan Downs (president); Silicon Valley Bank growth expert Scott Case (chief financial officer); and Wells Fargo Securities veteran Joe Celentano (global head of markets).

The Unison securitization surpasses Redwood Trust’s novel $146M securitization backed by shared equity agreements, an earlier sign of the asset class’ rise.

Rising real estate values offer attractive returns but they could take years to materialize and be wiped out if there’s no appreciation.