Redwood Trust, Point issue first home equity investment securitization

Redwood Trust has announced the issuance of a securitization backed by agreements in which investors purchase a share of equity in homes without putting a lien on the property.

The novel $146 million bond issue, Point Securitization Trust 2021-01, could be an indication that volume in the asset class has gotten large enough to be programmatic in the high-priced housing market.

Over the years, several companies have experimented with various arrangements of this type, which are popular among secondary market investors, but generating enough volume to regularly sell or securitize has been challenging.

Currently, the $34 trillion single-family housing market includes $23 trillion in home equity and $11 trillion in mortgage debt outstanding, according to a recent Redwood Trust analysis of Federal Reserve data.

The home equity investments in this arrangement come from Point, an online startup that promises to pay owners $25,000 to $350,000 cash, depending on the value of the home and amount of equity involved. Its agreements have flexible repayment terms over a 30-year period. Point also is the securitization’s co-sponsor and servicer.

“Homeowners across the country are turning to home equity investments in record numbers to unlock more than $20 trillion in illiquid wealth tied up in their homes,” said Eddie Lim, co-founder the CEO of Point, in a press release. “This first-of-its kind of securitization is a testament to the investments we’ve made in Point’s technology platform.”

The transaction, which was quietly completed in late September, was unrated and consisted of an $120 million A-1 class and a $$26 million A-2 tranche. Nomura Securities International served as the sole structuring agent and bookrunner.

Redwood Trust has a reputation as a pioneer in the private-label residential mortgage-backed securities market, and was one of the first to return to it after the Great Recession. The real estate investment trust’s partnership with Point is part of its current diversification strategy.

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