SAN FRANCISCO, February 10, 2022 (Inside Mortgage Finance)
Having recently completed its first securitization of residential equity agreements, Unison is already working on a second deal, a hopeful sign for this nontraditional business.
Company portfolio manager Matthew O'Hara said the San Francisco-based Unison closed its first securitization – not exactly an MBS – in late December, an offering sized at $443.0 million.
Nomura Securities acted as the structuring agent and joint bookrunner with Barclays Capital serving as joint bookrunner. Mayer Brown was the deal's legal adviser while Sidley Austin represented investors.
The “A” bond on the securitization pays investors 4.5% while the subordinated bonds carry a yield of 6.5%. There are residual tranches as well.
O’Hara is careful to point out that residential equity agreements should not be confused with traditional mortgages. A lien is recorded, he said, but “it’s not considered a debt.” That’s good news for the consumer.
The borrower gets into a home with little in the way of a down payment but agrees to share the upside on the property’s appreciation with Unison.
Depending on how much money Unison brings to the table, the equity share can range from 40% to 70%. The company, licensed in 29 states and Washington, DC, originates and services the loans as well.
Unlike some REAs, Unison caters to prime credit borrowers. “Our average FICO score on the ($443.0 million) securitization is 760,” O’Hara told Inside MBS & ABS.
He is uncertain when exactly the second transaction will hit the market, though it is in the works. “We’d like to do more of these,” he noted.
To date, there have not been many REA securitizations and Unison believes its late December transaction is the largest one ever.
In a statement, the company said the transaction “offers the opportunity for investors to access residential real estate equity and increases liquidity for homeowners across the country looking to monetize the equity in one of their most valuable assets – their homes.”
The privately held Unison gets its cash from private investment funds and there’s a real estate investment trust component as well.
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