Key facts
- Point has launched a wholesale channel to distribute its home equity investment (HEI) products through mortgage brokers.
- The company is prioritizing deliberate growth and building a scalable foundation for its wholesale business.
- HEIs offer homeowners upfront cash in exchange for a share of the home's future value, without monthly payments.
- The product is attracting regulatory attention, with potential implications for licensing and disclosure.
- Homeowners are increasingly turning to HEIs to access equity while preserving low mortgage rates.
- Point recently closed a $508.6 million securitization backed by HEI assets, indicating strong investor demand.
California-based Point has introduced a wholesale channel to distribute its home equity investment (HEI) products through mortgage brokers, aiming for controlled expansion rather than rapid volume.
Samuel Bjelac, head of wholesale at Point, stated that the company's focus over the next 12 to 18 months is on establishing a scalable wholesale business, cultivating strong broker relationships, and ensuring consistent execution. He believes that a solid foundation will naturally lead to increased volume.
The wholesale initiative is designed to serve homeowners who possess significant home equity but are hesitant or unable to secure additional debt through traditional methods like cash-out refinances or home equity lines of credit. Point presents HEIs as an alternative for these borrowers.
Under an HEI agreement, homeowners receive immediate cash in exchange for granting an investor a portion of the home's future appreciation. The homeowner retains ownership, remains responsible for property taxes, insurance, and maintenance, and has the option to buy back the investor's stake within a specified period. Notably, these investments do not require monthly payments.
While this structure appeals to homeowners seeking to maintain their current low mortgage rates or those facing difficulties accessing conventional credit, it introduces complexities for originators and regulators. Point plans to provide training to mortgage brokers on the structure, disclosure, and repayment of these products.
HEIs have drawn increased scrutiny from state regulators who are evaluating whether these products fall under existing mortgage definitions or necessitate distinct licensing and disclosure protocols. Senator Jeff Merkley (D-Ore.) has proposed legislation to amend the Truth in Lending Act (TILA) to encompass HEIs within its definition of residential mortgages.
Simultaneously, some homeowners have initiated legal challenges concerning consumer protections amidst this regulatory uncertainty.
Point's expansion into wholesale occurs as U.S. homeowners collectively hold a record $34.5 trillion in home equity. Many are reluctant to refinance their low-rate mortgages or take on new monthly debt obligations, driving interest in options like home equity investments.
Isak Poirier, head of investor operations at Point, noted that homeowners are increasingly seeking ways to access equity without altering their mortgage rates or incurring new monthly payments, thus exploring home equity investments. He added that investors are recognizing this demand, which is attracting their attention and is expected to grow as awareness increases.
In June, Point successfully closed a $508.6 million rated securitization backed by HEI assets, marking the largest transaction to date in the sector. The company indicated that this transaction enables programmatic securitizations to support originations, including those from brokers.
Jordan Fox, head of capital markets at Point, reported sustained strong investor demand, with the onboarding of new investors over the past year facilitating larger funding volumes and more frequent securitizations. He anticipates continued investor demand as the asset class expands and Point's issuance becomes programmatic.