Early this month, California fintech Achieve announced the closing of its first AAA-rated securitization backed by $175 million in home equity lines of credit.
The securitization — which is the process of bundling mortgages into a pool and selling shares of the pool as bonds — consists of three classes of rated notes, which are backed by about 3,300 HELOCs originated by its affiliate Achieve Loans, formerly known as Lendage, the fintech company said in a release.
The HELOCs in the portfolio have an average seasoning of seven months and range from two to 33 months seasoned. DBRS Morningstar gave the securitization’s Class A notes a rating of AAA, the Class B notes a rating of BBB and the Class C notes a rating of B.
“This deal is among only a handful of AAA-rated securitizations of HELOCs issued since the Great Recession,” Achieve co-founder and co-CEO Andrew Housser said in a statement. “What makes this securitization truly unique is the consumer-centric nature of the Achieve HELOCs backing the deal.”
A HELOC allows homeowners to access the equity in their homes without refinancing their primary mortgage. It works as a revolving line of credit that allows borrowers to withdraw as needed, and it comes with a variable interest rate.
In contrast to traditional HELOCs, which offer variable rates, interest-only periods, or balloon payments, HELOC from Achieve is fixed-rate and fully amortizing, which eliminates the uncertainty and risk of payment shock, the firm said.
Achieve’s HELOCs are fully drawn at origination and carry a 10- or 15-year term that includes a five-year draw period.
While mostly secured by a junior lien on the homeowner’s primary residence, a small portion of HELOCs hold a first-lien position and a collateral valuation process that aims to preserve an ample cushion of remaining home equity, Achieve said.
According to the California fintech, HELOC borrowers who use Achieve saved an average of $860 per month compared to their previous payments of unsecured debt, including student loans, credit card and personal loans. This helps its members “address their immediate financial needs without jeopardizing their opportunity to build long-term wealth via their home.”
Headquartered in San Mateo, California, Achieve has more than 2,700 employees across the country, with additional offices in Arizona and Texas.