As home prices soar to record heights, institutional investors are warming to the idea of taking an equity stake in single family homes in exchange for a share of profits that may be realized when the home is sold.
That’s Unison Investment Management’s perspective on its recent securitization of $443 million in residential equity agreements (REAs), which the company said is the largest securitization of REAs to date.
Unison says it’s transforming the way homes are purchased and owned by allowing homeowners to trade a portion of their equity for cash, instead of borrowing against their home. The San Francisco-based startup is then able to package the REAs into securities that can be purchased by investors. Most U.S. mortgages are funded in a similar fashion, with home loans bundled up into mortgage-backed securities.
The $443 million REA securitization Unison closed on Dec. 22 “allows a wider range of investors to participate in the space of residential equity agreements,” Unison executive Matthew O’Hara said in a statement. “It also increases the efficiency of the market, which should lead to wider adoption amongst homeowners, ultimately leading to a larger, more liquid marketplace that benefits homeowners and investors alike.”
Nomura Securities International Inc. acted as the structuring agent and joint bookrunner, with Barclays Capital Inc. serving as joint bookrunner. Mayer Brown LLP served as the legal representative of the issuer, with purchasers represented by Sidley Austin LLP.
Record home price increases mean that U.S. homeowners have an estimated $10 trillion in “tappable equity” — the amount they can cash out while still retaining 20 percent ownership stake in their homes — according to an analysis by Black Knight. The 35 percent annual growth in tappable equity seen in 2021 left the average…