Point and specialty finance company Redwood Trust announced completion of what the companies claim is the first-ever securitization backed solely by residential Home Equity Investment (HEI) agreements. The transaction issued about $146 million of asset-backed securities. Point originated all the HEIs included in the deal and will continue servicing those assets.
HEIs enable homeowners to cash out on some of their home’s equity by giving an investment company a minority stake in the property. HEIs are secured like a loan, but homeowners do not make a monthly payment. At the end of the agreement (typically between 10- to 30-years in length), the homeowner pays back the advance in home equity from the investment company and a percentage of the home’s appreciation. Companies that provide HEIs charge an origination fee of around 3 to 4 percent, and will usually take a 15 to 25 percent share of the home’s appreciation. HEIs are often seen as an alternative to Home Equity Lines of Credit (HELOCs)