By ROBERT DAVIS
Redwood Trust, one of the country’s largest mortgage investment firms, launched its own home-equity investment platform on September 6.
The platform, known as Aspire, is designed to give homeowners access their home equity at a time when high interest rates make debt unattractive. Redwood plans to directly originate the home equity investments through the company’s nationwide network of loan officers, according to a press release.
It also comes at a time when U.S. homeowners are sitting on more than $28.7 trillion in home equity, according to a recent analysis from LendingTree.
The move also underscores Redwood’s plan to bring “innovative solutions” to the non-agency mortgage investment market, the release said. While traditional HEI vehicles require homeowners and investors to find a common lender, Redwood’s Aspire platform creates a direct-to-consumer lending channel to access their home equity.
“When juxtaposing near-record high costs for traditional mortgage financing with record amounts of untapped equity in housing, our HEI product provides an attractive solution for many consumers who often qualify for additional home debt but prefer the flexibility of an equity investment,” said Redwood Trust CEO Christopher Abate.
Traditionally, homeowners who want to tap into their home equity must take out another loan against the value of their property like a closed-end second lien mortgages or home equity lines of credit. However, today’s high interest rate environment makes those options unattractive for several reasons.
Abate said Redwood Trust, which has more than $350 million of home equity investments in its portfolio, would help the firm “address the needs of consumers” and align the “interests of homeowners and investors” on a large-scale.
“We have been fortunate to work alongside a handful of HEI originators over the last few years, helping to bring liquidity and product development expertise to this emerging asset class,” Abate said.
Some industry leaders have indicated that credit quality lags with HEIs. Spring EQ CEO Jerry Schiano commented in a recent online event that homeowners who turn to HEIs tend to have a little rougher credit and different income qualifications. This sector slightly overlaps with home-equity lending. Brian Brennan, who is in whole loan trading at Saluda Grade, noted at the same event, “It’s kind of a credit repair product. To some extent, it tends to be a little bit lower FICO universe than with what we’re talking about with Figure and Spring EQ. But it can be a very good product from a credit repair standpoint.”
Robert Davis is a freelance housing market reporter for Home Equity Lending News. Over the past decade, his work has been featured in publications that include Business Insider. Robert obtained a Master of Science degree in Journalism from New York University. Reach him at [email protected].