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Shared equity pioneer Unlock Technologies says it will expand its product set and geographic footprint with $30 million in Series B financing.
The “strategic partnership” with D2 Asset Management announced Tuesday also includes a $250 million capital commitment to support origination growth.
Unlock lets homeowners unlock $30,000 to $500,000 in home equity without having to make monthly loan payments by selling a stake in their home. Unlock says it’s signed home equity agreements with more than 10,000 homeowners in 16 states to date.
The Tempe, Arizona-based fintech says it will use the new funding to launch new solutions tailored “for specific homeowner segments, such as prospective homebuyers, retirees, and those who do not qualify for traditional mortgages and home equity lines of credit,” and to expand its reach nationwide.
Unlock is currently available in 14 states: Arizona, California, Colorado, Florida, Michigan, North Carolina, New Jersey, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Virginia and Washington.
Luke Doramus
“Unlock has exhibited exceptional leadership in creating innovative solutions to address critical challenges in today’s housing market,” said D2 Asset Management managing partner Luke Doramus, in a statement. “The home equity agreement has the potential to revolutionize how homeowners can tap into their home equity, and we are excited to make a significant commitment to support the Unlock team as they expand their business.”
Also participating in the funding round were Saluda Grade — an asset management platform that last year teamed with Unlock on the first rated securitization of $224 million in notes backed by home equity agreements — and Second Century Ventures, the National Association of Realtors’ venture fund.
Jim Riccitelli
“We are thrilled to have the support of this group of investors,” Unlock CEO Jim Riccitelli said, in a statement. “This funding validates our vision of democratizing home equity and empowering homeowners to achieve their financial goals. With this capital, we will accelerate our growth and continue to develop innovative solutions that unlock the true value of homeownership.”
To fuel what it expects will be a “rapid nationwide expansion,” Unlock says it will “strategically invest in marketing and brand awareness initiatives to establish a strong presence in new markets. By expanding its footprint, Unlock aims to reach a broader audience of homeowners and make its innovative home equity solutions accessible to more people across the country.”
Unlock also plans to “significantly invest in its technology platform” to automate key processes, streamline the homeowner journey and enhance efficiency. Unlock “will focus on developing advanced data analytics capabilities to gain deeper insights into customer behavior and preferences, enabling the company to offer personalized recommendations and support.”
Rising interest rates have made it more costly for homeowners to convert their equity into cash by borrowing against their home. Unlock and rival providers tout shared equity agreements as a way for homeowners to turn equity into cash without taking out a loan.
Fannie Mae and Freddie Mac’s regulator, the Federal Housing Finance Agency (FHFA), has proposed to lift restrictions that prevent the mortgage giants from buying shared equity loans. Fannie and Freddie see the loans as a way to help would-be homebuyers in higher-cost markets by letting them pledge a share of their future home price appreciation to investors.
In a product guide, Unlock says it typically obtains a stake in a client’s home that’s equal to about twice the value of the cash it provides upfront. At the typical exchange rate of 2.0, a homeowner who receives cash equal to 10 percent of their property’s current value grants Unlock an ownership stake equal to 20 percent of its future value.
With high interest rates curtailing homebuyers, investors who fund most U.S. mortgages are eager to back alternative products, with San Francisco-based Kiavi Funding in August closing its first rated securitization of notes backed by short-term “fix-and-flip” loans totaling $400 million.
Having credit rating agencies evaluate such securitizations can give investors more confidence that they understand the risks and rewards involved. Some institutional investors won’t invest in securities that aren’t rated.
Ryan Craft
“A rated securitization is the only way for an asset class to become mainstream,” Saluda Grade CEO Ryan Craft said last fall when DBRS Morningstar rated $224 million in notes backed entirely by nearly 2,000 home equity agreements originated by Unlock and issued by Saluda Grade.
Rated securitizations are also providing a funding boost for lenders who offering home equity loans and home equity lines of credit (HELOCs). While those loans have traditionally been provided by banks that hold the loans on their books, a number of big nonbank mortgage lenders including United Wholesale Mortgage, Rocket Mortgage and loanDepot have gotten into business of providing home equity loans or HELOCs.
Figure Technologies, which claims to be the nation’s largest nonbank provider of HELOCs, announced its first rated HELOC securitization last year.
Figure, which works with private label partners including CMG Financial, CrossCountry Mortgage, Fairway Independent Mortgage, Guaranteed Rate, Homebridge, The Loan Store, Synergy One and Movement Mortgage, says it’s provided more than $10 billion in HELOCs to about 140,000 households and are continuing to lower the cost to originate as we drive more volume to Figure Connect.
“We have more than 110 embedded relationships, including half of the top 20 mortgage lenders,” Figure CEO Michael Tannenbaum said in a July blog post about his first 100 days on the job. “Partnerships currently account for more than 60 percent of our originations.”
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