Palo Alto, California-based fintech Point, which offers home-equity investment (HEI) contracts to homeowners, is expanding its services into Nevada and Ohio.
With the expansion, Point’s HEI contracts are now available in 18 states and the District of Columbia, according to the company.
“Nevada homeowners are sitting on more than $150 billion in tappable home equity, and Ohio homeowners have more than $330 billion,” said Eddie Lim, CEO and co-founder of Point. “The vast majority of homeowners in both states have tappable equity and are sitting on an incredible amount of wealth in their homes.
Point’s HEI contracts provide homeowners with cash upfront in exchange for a contract providing Point with a slice of the homeowner’s equity. That share, via Point’s home equity investment contracts (HEIs), is typically around 10% or so.
“As an HEI is equity financing, it doesn’t add a monthly payment to a homeowner’s expenses,” Point’s announcement of its market expansion states. “Homeowners can access up to $500,000 and have the flexibility to buy their equity back at any time within the 30-year term with no penalty.
“…To qualify, the home needs to be valued at least $155,000 and the homeowner must retain at least 20 percent of the equity after Point’s investment.“
Prioritizing home equity solutions in a rising rate environment
The 2022 housing market has been underscored by interest rate spikes and refi decline and lenders are working hard to adjust to new borrower trends. HousingWire recently spoke with Barry Coffin, managing director of home equity title/close at ServiceLink, about the ways lenders can capitalize on these trends by revving up their home equity solutions.
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Point, which claims on its website to “have served over 5,000 homeowners,” has set the financing pillars in place to help propel its growth and take advantage of market conditions. Last year, Point and specialty finance and real estate investment firm Redwood Trust — which holds an investment stake in Point — completed a first-of-its- kind securitization deal backed by HEI contracts.
The private-label securities transaction closed in late September 2021 and represents a new liquidity channel to help fund future HEI pacts. The offering involved issuing $146 million in securities through a conduit dubbed Point Securitization Trust 2021-1.
In addition, earlier this year, Point announced that it had raised $115 million through a Series C fundraising round led by venture capital firm WestCap. The capital will be used to accelerate Point’s growth in the expanding home-equity market, according to the company’s co-founder and CEO Eddie Lim.
Point said that it plans to use the funding to augment its product line as well as its market footprint — with a goal of being in a total of 28 markets by early 2023.
Point also has raised about $54 million in venture capital through three previous funding rounds, according to Crunchbase. The venture capital investment is in addition to $1 billion in separate capital commitments from investors that Point has lined up to help fund its HEI contracts.
Point is not alone in chasing opportunity in the home-equity market. One of its main competitors in the space, for example, San Francisco-based Unison, also is aggressively extending its market reach. Unison, through its platform, offers homeowners the opportunity to tap their home equity without taking out a loan — via a home-equity investment product that it calls a residential equity agreement (REA).
Unison announced earlier this week that it was expanding its services to Nebraska, following the opening of an office in Omaha earlier this year. Unison, as of June 30, boasts having in force $6.1 billion in equity-sharing agreements with some 9,000 homeowners across 29 states and the District of Columbia
Earlier this year, Unison bolstered its liquidity options by completing a $443 million private-label offering backed by shared home-equity loans — with plans to pursue future securitizations as well.
The growth in the home-equity market, and its attractiveness to companies like Point and Unison, is being driven by fast-rising home prices. Single-family home prices grew at an annualized rate of 19.4 percent in the second quarter of this year, according to Fannie Mae’s most recent Home Price Index report. The Federal Reserve now estimates home equity nationwide is now valued at nearly $28 trillion.
“CoreLogic analysis shows U.S. homeowners with mortgages (roughly 62% of all properties) have seen their equity increase by a total of over $3.8 trillion since the first quarter of 2021, a gain of 32.2% year over year,” states the property-information and analysis company in its first-quarter 2022 Homeowner Equity Insights report. “[Through] the first quarter of 2022, the average homeowner gained approximately $64,000 in equity during the past year.”
Point CEO Lim said, however, that home equity isn’t always easily accessible to help homeowners with “life’s needs or to achieve a dream.”
“And with mortgage rates on the rise, refinancing is a less attractive way to leverage home equity,” he said. “A Point HEI is a great option for homeowners who are ‘house rich but cash poor.’”
