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.
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Home equity startup Point powers first-of-its-kind securitization
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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)
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