RMBS Backed by Non-Loan Home Equity Assets

A recently issued residential mortgage-backed security is backed by assets tied to residential home equity but are not loans.

A $180 million RMBS transaction was announced by San-Francisco-based Unlock Technologies Inc., a financial technology company, and New York-based Saluda Grade, a private alternative real estate investment firm.

“The senior debt offering in the securitization was oversubscribed with participation across mutual funds, credit funds, banks and asset managers,” the news release said. “All investors in the transaction were first-time participants in securitizations backed entirely by home equity agreements.”

Home equity agreements typically enable homeowners to access equity from their house by giving the funding organization a minority stake in the property. There is no interest or payment. Instead, the homeowner gives up a share of the equity growth in addition to the advance amount that is due upon sale or at the end of the agreement term.

“As the HEA asset class achieves mainstream adoption from traditional financing sources, we will continue to provide creative financing solutions to many thousands of deserving families that cannot qualify for traditional home finance products like HELOCs and cash-out refinance loans,” Unlock CEO Jim Riccitelli said in the statement.

All of the home equity agreements were originated by Unlock, which also acts as servicer for the assets.

Jefferies was sole structuring agent and lead underwriter, Barclays was joint bookrunner, and Baird was a co-manager in the securitization.